Planning for your future is now more important than ever. The pandemic has re-defined the way we think about life insurance.
As we have seen, life can change so quickly and with very adverse financial consequences for you.
A life policy may not protect your business, but it sure will protect your income-earning protection – in both the short and long term!
But, you must have cover in place, so if you do not have life and disability insurance, or are concerned about what you do have, then NOW is the time to sort it out!
Remember, nasty things can happen fast these days.
The four greatest risks facing us are temporary illness or injury and permanent disability, suffering from a dread disease and death – with injury and temporary illness being the greatest risk preventing us from earning an income.
Over the last months, we have all too clearly seen how important earning an income is. Everything you have and desire can be reduced to one basic thing … what money you earn. That amount determines what you have and the life you and your family live.
Without that income, everything stops!
Your goals, both short and long-term are unique to you.
So, you need a product that recognises that from the start – matching your needs.
It must be real, sustainable, cost-efficient and have no wasted premiums!
It must offer comprehensive cover, because you cannot choose a disability.
You can only choose the best product to cover that risk!
Disability Income Protection insurance provides for an income if you are unable to continue working and comes in many forms, so it's important to understand exactly what you might be buying.
While you want value for money, make sure you fully understand the benefits of each policy before you take one out!
The liability of providing an income into the future lies with you and how best you invest the claim proceeds.
This is the lowest cost form of disability insurance when added to a life insurance policy.
The cost is higher than capital disability, but it is a far better, more comprehensive form of cover!
|Lump Sum||Income Replacement|
|You carry the risk of investing a lump sum of money and creating an income.||Claim payment will closely match your income when claiming and into the future.|
|You have to account for investment returns, inflation and make your money last.||Payments keep pace with inflation. You have no investment return concerns.|
|Only permanent disability.||Temporary Disability is covered and most claims are for this type of disability.|
|Has nothing to do with loss of income, so can pay even if you are disabled and can still work.||Only pays on loss of income.|
|Used mainly to settle debts with lump sum payments.||Monthly income only.|
|Continues after your death to support your family.||Ceases with death.|
There are 3 forms of disability cover, based on the type of occupation you do - own occupation, own or similar occupation and total disability and impairment. It is important that you understand what threat each definition holds for you.
Occupational definitions can range from being unable to perform your specific occupation, for example, as a neurosurgeon, to being unable to perform any occupation at all. This is vital to understand as many companies define disability differently.
This is the most difficult to claim on and has the lowest cost.
Please ensure that you are correctly insured for the job you do.
A disability can be permanent or temporary, when you recover you may be able to return to work. You need to insure for both cases.
Permanent Disability – cover from date of the disability until your nominated retirement age, for example age 60 to 70 or for life.
The vast majority of disabilities never become permanent so temporary disability is vital.
Temporary disability - according to research, you are nine times more likely to have a temporary disability than to have your car stolen or be hijacked in South Africa and 70% of people will experience at least one injury or illness during their working lives that will prevent them from earning an income. That is no small risk you face!
A temporary disability provides a monthly payout for between 0 and 24 months and will stop as soon as you recover.
Disability implies the inability to perform an occupation in the event of an illness or accident.
Disability insurance aims to compensate you for this future loss of income.
On the other hand, an impairment implies a physical or functional disorder - such as the loss of a limb - that does not necessarily stop you from earning an income.
Impairment benefits are just as important as disability benefits because they provide cover against unexpected expenses that you may face living with a such a disability.
An example would be a computer programmer who suffers partial paralysis. You could still work as a programmer, but may need a wheelchair and cannot drive a car?
This kind of cover is equally as important for those who don't have dependents because it enables them to remain financially independent, maintaining their dignity and self-sufficiency. It is very difficult for those with physically demanding occupations - such as professional athletes, builders and plumbers - to get disability cover, because they present an above average risk to insurers.
This is where impairment benefits are important because they allow clients to insure their lifestyle and are linked to the ability to perform Daily Activities rather than the ability to perform a specific occupation.
Partial Disability - Approximately 30% of disability claims relate to partial disability events, so you may want to ensure that your policy covers you for partial disability, where you are able to perform some, but not all, of your normal duties.
Partial disability is a notoriously difficult are to claim on, so you must get a policy that makes specific provisions for partial disability.
If you cannot do some of the work you need to in your own occupation, or are not able to work for a full day, you should be able to claim.
For example, your GP recommends light duty work when recovering from treatment or awaiting surgery.
Partial disability can become a permanent disability. If you suffer from a long-term moderate heart impairment or chronic back pain, that may lead to a loss of income.
It is well known that the risk of dying as a result of contracting the Corona-virus is extremely low for most people under the age of 60. However, the risk of your income-earning potential being negatively affected is far higher!
Suffering from COVID-19 will mean not working and even hospitalisation for quite some time.
And like with other causes of a disability (which have not “gone away”), if you are sick and unable to work, income protection is vital!
Income protection has more advantages than traditional lump-sum disability insurance because it matches your needs more closely than a lump sum benefit can ever do.
Because almost everything we enjoy in life is as a result of what we earn, if that income stops – either permanently or temporarily – we will be in serious financial trouble! This is even more of a threat these days as the effect of Covid-19 has resulted in many people running their own businesses, after losing formal employment when companies have closed.
Suffer an illness or accident that prevents that income from flowing and you and your family can lose everything!
That includes the ability to afford the best medical treatment, the best education for your children and your pension savings!
If you have funds to see you through a waiting period, then choose a plan with a longer waiting that you are comfortable with. It is more cost-effective.
Your greatest financial asset is your ability to earn an income, so it is important is protect your future pay cheques until your projected retirement date.
And while you’re more likely to suffer an illness or injury the closer you get to your retirement; your financial exposure is highest in your thirties and forties when you’ve got more pay cheques to cover and a higher outstanding debt on your home loan.
If you are young and single, you must insure against a disability stopping you from earning an income. For without it, who will have to support you for the rest of your life? And how will you feel having to always rely on others?
If you cannot insure your full income at least try cover 30% to 50% of it. Just start somewhere!
As you grow and maybe get married or have a family, you need to look at what you and they will need if you lose your ability to earn an income. The house bond, children’s education costs, added medical expenses and so on.
Your first step is to get an insurance quote, so you know what premiums you face.
No two quotes are the same as it is based on your unique personal details and situation.
Use a qualified broker like myself, as rates do change between certain life insurance companies and you can get a range of quotes from different providers.
You can then “design” the cover to suit your needs and wants. You can add benefits and change amounts if you are not happy with what you are shown. Remember, a quote is not a contract!
Be specific as to what you want and be aware some brokers may try and sell you an inferior product (because they don’t know better- are a ‘tied agent’ to a specific insurance company - or because they can make the premium look cheaper with some fancy footwork).
Rather take out less cover with a responsible product, than more cover for a low premium!
The best policy is one with no “fine print!”
It is a transparent product that hides nothing, has no wasted benefits and gives you exactly what you need.
Income protection is an insurance that is constantly evolving. It is part of an extremely competitive market where products are constantly being enhanced and upgraded.
Because different insurers have different product “bells and whistles” to gain a marketing edge, it is extremely difficult to find a “like-for-like” comparison.
You need an experienced, independent advisor who will help you determine the right amount of cover, the right waiting period and the right term for your individual needs.
Someone to trust leading you through these options.
Make contact with me TODAY!!
You must consult the schemes/company product brochures and rules for comprehensive benefit descriptions.
We will offer you the BEST HELP FOR FREE!
Medical aid pays healthcare costs.
What if a disability STOPS your income?
Peter Pyburn - Authorised Financial Services Provider, fully licensed to render financial services since 1991. Death and Disability Planning; Retirement Planning; Investment Planning; Healthcare and Estate Planning. More...
Hosted by hostking.
Check out what this excellent ISP offers you!
You can get a 1-month FREE trial!
By submitting an enquiry you agree to us collecting the information in the fields above. Please refer to our POPI Manual.
Your data will be processed according to the Protection of Personal Information Act (POPIA) guidelines
South African rights reserved.
Last update: May 16, 2022