If any of you have seen a life insurance advert recently, you may have noticed that the cool thing to do these days is give you all your premiums back after 15 years, if you haven’t claimed. That’s cool right? After all, even Chris Rock famously bemoaned insurers for not doing this in the past:
And yet, we don’t like it. Here’s why:
1. Getting your premiums back sounds better than it is
We’ve seen the ads. “Johann will get R176,500 back in 15 years.” And then there’s Johann, with his picture-perfect family saying smugly, “I’m going to take my family on a worldwide holiday when I get my premiums back…”
Sorry, Johann. You’re going to be doing nothing of the sort.
And that’s because your cash-back will be worth closer to R75,000 when you finally get it. This is because inflation will erode the spending power of that money over the years you spend waiting for it. Not cool.
This is one of the principle issues we have with cash-back schemes. The value they show you today, is misleadingly high compared with the actual value you will eventually get. And this appears to be willfully manipulative marketing, which rubs us the wrong way.
2. You pay a lot extra to get your premiums back
Another bugbear is that you have to fork out a lot extra in premiums in order to “buy” this cash-back feature. In some cases the additional premium can be over 40% more on top of what you would have paid without the cash-back.
We made something better — the Wealth Bonus
We created the Wealth Bonus, which is better in every way than a simple cash-back. For the uninitiated, Sanlam Indie's Wealth Bonus is an investment we give every Sanlam Indie client with their insurance policy — every single month.
1. With the Wealth Bonus, what you see is what you've got
Unlike cash-back figures which get quoted, the value you see today is the value of your Wealth Bonus today. If we say you've got 50 grand, there’s no smoke and mirrors here. You’ve got 50 grand.
2. Your Wealth Bonus is investible
Once we allocate your Wealth Bonus, it's invested in a Money Market account. Soon, you'll be able to choose where you want to invest it. Want to invest it offshore? Go ahead! Worried about markets? No problem, park it in cash. It’s yours, and you'll be able to do with it what you want.
3. Your Wealth Bonus should grow — and can grow faster than inflation
Because the Wealth Bonus behaves like an investment, wise allocation of it makes it probable that it will grow faster than inflation. And this means it will be worth more tomorrow than it’s worth today. We don’t give you cash back, we give you the opportunity to generate wealth with your premiums.
Cash-back is capped at the total amount of premiums you’ve put in. Your Wealth Bonus is uncapped. And our simulations show that for younger clients, the Wealth Bonus should become multiples of the premiums you’ve paid when you eventually receive it.
4. The Wealth Bonus doesn't increase your premium
It's baked into every policy we issue. And we don’t charge you anything extra for it. In fact, we believe that the Wealth Bonus actually lowers the cost of your premiums (check out how).
Okay, so what's the catch?
There are three catches.
First — zombie apocalypse. In all honesty, we have no actuarial models to know what happens in this event, but we figure your Wealth Bonus will be the least of any of our concerns in this event.
Second — we give all clients access to some of their Wealth Bonus every few years, but if you really want your Wealth Bonus to accumulate into something meaningful, you’ll want to leave it all there and let it grow.
And third — if you leave Sanlam Indie, you leave the Wealth Bonus behind. You’ll have access to the unlocked amounts which we call CashDrops. Maybe at this point you’re thinking “Hey Sanlam Indie! That’s a sneaky way to make sure your customers never leave” to which we’d respond — “I know, riiiight?!”