By: Karen Bongers, Product Development Actuary at Sanlam Individual Life

In 2020, 59% of all COVID-19 related Sanlam income protection pay-outs were to people younger than 39 years old. This underlines the critical importance of income protection for young professionals, says Sanlam Product Development Actuary Karen Bongers, noting that the long-term loss of income due to illness or injury is the single biggest financial risk young people face throughout their working lives.
Beyond the financial impact of illness and injury, economic realities are resulting in South Africans battling to meet their monthly financial obligations, which makes income protection even more important.
Over the last year, research by Catalyst shows that 41% of respondents relooked their finances and insurance cover, highlighting the financial uncertainty felt by so many. As an adviser, you have probably experienced this with your own clients. Difficult economic times exacerbate the inability of most people to carry themselves financially if an illness or injury means they are unable to work, even for a short period.
“Imagine a 28-year-old primary breadwinner being rendered unable to work for six months. The knock-on effect for them and their family would likely be immense,” says Bongers. With South Africans’ household savings rate just 1.2% in the third quarter of 2021, few households are likely to have emergency funds to ‘cover’ a lost income for more than one or two months.
She adds, “Of course, the impact is much worse if the inability to work is permanent. Our claim statistics show that it’s not just older individuals who need income protection. The permanent loss of an income is particularly concerning for younger people, who have many more years of earning potential ahead of them.”
Here, Bongers outlines some frequently asked questions around income protection to guide your conversations with clients:
- How is income protection different to disability cover? The terms can be used interchangeably, but income protection generally refers to products that pay a monthly income if you are unable to work, either temporarily or permanently, due to illness or injury. Disability cover generally refers to benefits that pay out a lump sum if an illness or injury renders you permanently unable to work.
- Who qualifies for income protection cover? Generally, you need to be employed, have a qualifying occupation and be medically insurable. However, certain products can expand to accommodate those not meeting these criteria, such as Sanlam’s accidental income benefit, which is available to medically uninsurable people – a market first in South Africa. Another example is Sanlam’s Impairment Income benefit, which can provide income cover to those who do not qualify for occupational disability cover, such as stay-at-home parents.
- Does your income protection include impairment cover? Living with a permanent impairment, like a physical disability or an illness that affects your lifestyle, can result in additional monthly expenses even if you can still work. Some products – like Sanlam’s range – have the option to select the extent of impairment cover depending on your needs and budget.
“As a financial planner, it is essential to speak to your clients about income protection to ensure the financial security of them and their loved ones, especially in the current climate of uncertainty where even short-term losses can wreak havoc,” concludes Bongers.
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