You’re happily swimming in the ocean on a sunny summer day when suddenly, a thought pops into your mind (along with the Jaws soundtrack): Are there sharks out here…? Channelling your inner Tatjana Schoenmaker, you’re back on dry land in record time.
While shark attacks are incredibly unlikely, the likelihood of being unable to work for a period of time due to illness or injury is not. And while becoming permanently disabled is less likely than having a temporary disability you recover from, this possibility should not be ignored given the devastating financial implications of no longer having a source of income. That’s why it’s essential to protect against both by ensuring you have the appropriate cover in place.
Is income protection also relevant for younger people? Karen Bongers, Product Development Actuary at Sanlam, says, “Our 2020 claims statistics show that 46% of income protection claims were by individuals between 26 – 45yrs and 1 in 5 claims were by people younger than 35. The single greatest financial risk a young person faces is the loss of their ability to earn an income. In the case of temporary disability, because they often don’t have a sufficient buffer in place, and in the case of permanent disability, because there are so many prime earning years ahead.”
Real life case studies that show why Income Protection is invaluable
‘It won’t happen to me’ is the common mentality most people have. But sometimes, the statistics say otherwise and it’s wise to hope for the best but prepare for the worst. Here are two real life case studies – both Sanlam clients – where having income protection made a massive difference.
In November 2019, prior to lockdown and the normalisation of work-form-home, Dionne, a 36-year-old attorney, fell down a flight of stairs while five months pregnant, breaking her toes. This meant she couldn’t work or drive. Her income protection pay-out proved invaluable, “Not only did I still have income, but I also had money available to take care of medical bills… Losing my ability to look after my family financially, even for a temporary period, would have been really hard for us.” She took the policy out at the urging of her financial adviser, early on in her legal career. “It has definitely proven a worthwhile product to have.”
Miehleketo, a 35-year-old business analyst, had an operation and was hospitalised and unable to work for a month. That was incident number one. Later, he was injured while running and again unable to work. “The pay-outs provided me with a fall-back plan, instead of needing to take out loans to fulfil my monthly obligations.” Without income protection, he’d have had to use his ‘rainy day’ savings, or go into debt, if these didn’t suffice.
Income protection for business owners
Small business owners and entrepreneurs have been particularly vulnerable in recent times. The impact of being ill when you’re a business owner can be immense, especially if operations must halt for a prolonged period. Any business interruption has consequences. But long-term disruption can be devastating.
Zelda Apollis, Operational Manager: Living Benefit Claims at Sanlam says, “We’ve seen a number of claims from small business owners who have been ill with Covid-19 or had other illnesses or injuries and have been out of action for a while. When we look at income protection claims as a whole and not only those linked to Covid-19, there are also the grave cases of owners who are rendered permanently disabled and unable to work. This has huge implications for the business, its employees and the person’s family. South Africa’s household savings rate is at 0.7% according to Trading Economics. This means that few households are likely to have emergency funds to ‘cover’ a lost income for more than one or two months.”
Having income protection provides protection to guard against worst-case curveballs like this. “Income protection provides a monthly income to clients who are unable to work, either temporarily or permanently, due to illness or injury,” explains Bongers. “The Sanlam offering also includes cover for various permanent disabilities and illnesses that would affect someone’s income even if they can still work. In addition, the range offers Accidental Income benefits, suited for those who cannot qualify due to their medical history.”
For more information, she suggests contacting a financial adviser and visiting the Sanlam website.