Current difficult economic conditions are making life insurance too expensive for the majority of South Africans.
A survey by www.justmoney.co.za shows that almost one in five people have been forced to cancel their life insurance because they can no longer afford the premiums.
Though 58 percent of respondents polled currently have life insurance, 18 percent said they no longer have life cover because it costs too much.
These findings are supported by the life industry's own figures, with insurer Metropolitan Life reporting an annual lapse rate of 40 percent among its policyholders in May.
A lapse occurs when the policyholder stops paying premiums before the fund value exceeds the un-recovered costs, meaning that the paid-up value, or surrender value, is zero.
The Life Offices Association (LOA) also reported that the number of lapsed policies during the final two quarters of last year had increased by 14 percent over the previous six months.
The figures were actually 31 percent higher than the number of lapses during the second half of 2006.
The LOA's figures increased dramatically this year. The association reported in February that South Africans were underinsured to the tune of R10 trillion when it comes to life insurance.
Paul Beadle, managing director of www.justmoney.co.za, said the fact that almost one in five of respondents say they have had life insurance, but have been forced to cancel the policy because they can't find the money to pay for it, is a shocking statistic.
"If they are so strapped for cash that they cannot afford such vital protection, how will their families survive if they cannot work?" he asked.
According to him, life insurance is a vital financial safeguard for people, providing for their loved ones if the breadwinner cannot work owing to sickness, disability or death.
He says part of the problem is that consumers do not get good advice when they take out life insurance.
This results in their having no real understanding of why they need cover, what benefits it offers them and, most importantly, whether they have a cost-effective policy.
Some of the key questions that Beadle encourages consumers to ask their life insurance broker include:
lWhat type of cover do you need? Some policies only cover death, but what would you do if you could not work owing to long-term sickness or disability?
lIs the cover sufficient? Many people choose a policy that provides enough money to pay off their mortgage - but your family will still need a day-to-day income.
lAre the premiums guaranteed? Some life schemes have premiums that are guaranteed not to increase for a set period of time, some as long as 15 years, which can help you budget.
lHow much can you afford? There's no point taking out a costly policy that you will be forced to stop paying after a few months because you don't have enough money for it.