Johannesburg – 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 batt ling 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.
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.
The peace of mind linked to income protection cannot be overstated. In a recent study, PayCurve noted almost 80% of South Africans are seeking unsecured loans to meet their monthly financial obligations.
Another study by DebtBusters showed that 1.6-million South Africans capitalised on payment holidays, with resulting debt repayments of R20.7-billion.
Imagine a 28-year-old primary breadwinner being unable to work for six months.
The knockon effect for them and their family would likely be immense. With South Africans’ household savings rate just 0.7% in the third quarter of last year, based on a Trading Economics report, few households are likely to have emergency funds to “cover” a lost income for more than one or two months.
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.
Key things to know about income protection: 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.
A combination of both could help you cover certain once-off lump sum expenses, with the income payout providing a long-term replacement for your monthly income.
Who qualifies for income protection cover?
Generally, you need to be employed, have a qualifying occupation and be medically insurable to meet the requirements to take out income protection.
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.
• Karen Bongers is a Product Development Actuary at Sanlam.
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