A client’s biggest asset is their ability to earn an income. However, not everyone seems to be equally convinced of the importance of protecting this asset. This is echoed by the Association for Savings and Investments in South Africa (ASISA) which reported a total disability gap of about R16 trillion.
To get to the root of this problem one should go ‘back to basics’ and try to pinpoint some of the myths that exist about disability cover and how this drives behaviour.
Some of the myths that stop clients from acting on protecting their income include the thinking of “it will never happen to me” or “I will be able to make a plan when something happens” or “family and friends will help to tide me over” or ”I can survive by cutting down on my expenses until I recover”.
The reality is that should your clients instantly lose a regular stream of income, basic things like school fees and monthly groceries etc. will become unaffordable.
Not to even mention the larger expenses including bond payments, car payments etc. Even though a spouse or partner might also earn a monthly salary, not all expenses can be covered by a single salary. Without the protection of income in this instance, loss sets in immediately and the blow-back could last for many years to come.
Also, with the state of the economy, family and friends may not be in a position to assist clients financially either.
Statistics that highlight the prevalence of disability by stating that just over one in four 20 year-olds will become disabled before they retire, or that approximately 10 strokes take place in South Africa every hour, should not be disregarded. Considering these statistics, one wonders whether clients are really aware of just how big the risk is and how easily it can be mitigated by investing in comprehensive disability cover.
Comprehensiveness is key
When selecting the right disability cover, it is best to seek advice from a financial planning professional. There are many options available but clients should always try and select the most comprehensive cover that they can afford. In a world where consumer needs are changing at a rapid pace, and the fact that consumer needs are becoming more and more unique, new generation income protection benefits provide clients with much more holistic protection.
This means that the ‘value’ derived from, as an example, income protection, extends to other claim categories such as functional impairment, critical illness, hospitalisation and fractures; providing more claim certainty. Investing in holistic disability cover, underpinned by functional impairment, is especially important. This is evident when one considers that, during 2017, 47% of the disability claims that one of the leading insurers paid on their comprehensive and occupational disability benefits, were paid under the functional impairment definitions, even when there was no occupational disability event.
Mitigate risk and protect your clients’ futures
Your clients should secure their earning capabilities and protect their hard-earned money. Even clients who have the best possible retirement plans in place may find their plans derailed when faced with the financial consequences linked to a disability event.
As a financial adviser, protecting your client’s income stream today means that you have mitigated the risk that most likely would have had a negative effect on them and their holistic financial wellness, going forward.
AUTHOR: George Kolbe, Head of Marketing for Life Insurance at Momentum