The importance of salary protection and credit life insurance

Nothing in life is guaranteed; personal circumstances, especially health, can change in seconds. The question that most people should, therefore be asking themselves is: “If I couldn’t work tomorrow, how would I pay my bills?” If  you are the breadwinner and the answer is: “I don’t know”, it’s time to consider looking at insuring yourself so that you, your family, and your home are protected in the case of suddenly becoming disabled or dying.

According to Felix Kagura, Head of Long-Term Insurance Propositions at Standard Bank, salary protection policies should be part of any insurance portfolio as they provide protection against what could happen if you can’t work because of illness or injury.

“It is natural to shy away from discussions around becoming incapacitated or dying. However, both are always possible and it pays to face up to the reality of these situations and make provisions for them so a hard situation is not made worse by not being able to pay debts.  The facts are that, according to Stats SA, an estimated 7.5% of South Africans live with disabilities.

“As far as illness is concerned the situation is even more serious as men in this country have a ‘1 in 8’ chance of developing cancer, whilst women have a 1 in 9 chance of contracting cancer.  If these statistics from the National Cancer Registry aren’t frightening enough, the picture regarding heart disease also bear thinking about.

“According to figures released during National Heart Awareness Month in South Africa in 2017, 210 people a day a day succumb to heart disease caused mainly by lifestyle, which  in turn accounts for 28% of the total burden of disease in our country. Strokes which are one of the main causes of high blood pressure, impacts on about 440 people a day.”

As with any insurance, salary protection insurance depends on personal circumstances, and the level of cover is based on a number of factors, including personal risk profiles and the monthly premium. Typical solutions include payment of benefits on a monthly basis after a policy has been in place for six months. This helps you cover the cost of living expenses while you’re unable to work because of a prolonged illness, disability or death.

Unlike lump sum policies, salary protection pays you a set amount every month. The payments are usually a percentage of your current salary and can continue until you start working again or until a set retirement age is reached, if you claim as a result of illness or injury. 

Turning to credit life insurance, Mr Kagura points out that this form of insurance differs in one major aspect to that of traditional insurance:

“Credit life insurance is a policy designed primarily to pay off debts in the event of the insured’s death, permanent disability or terminal illness. What is different is the level of the pay-out; this decreases proportionally with the outstanding debt. Therefore, over a period of time, the premium decreases in line with the reduced level of debt until both reach zero value.

“Credit life insurance is usually bought when a loan agreement is signed and covers the principle amount of the loan and the interest. It can also be combined with asset and homeowners’ insurance to ensure the widest possible cover so that the home is secured for the family in the event of an unfortunate event befalling the homeowner. There are items and events that can be included that are able to cover for accidental damage or total loss of goods, as well as for fire and theft from premises.”

As with all policies, stresses Mr Kagura, it’s essential that people considering credit life insurance take time to read the policy, or get a qualified adviser to explain all facets of the coverage being bought.

“All insurance is highly personal. Your unique needs should be discussed with the insurance provider, so the best coverage can be obtained. Peace of mind is priceless. This is especially so when one is considering not only personal requirements, but also those of the family,” concludes Mr Kagura.

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