By Karen Bongers, Product Actuary at Sanlam Risk and Savings
In today’s challenging economic landscape, where rising costs and financial pressures are top of mind, the conversation around income protection is more critical than ever.
As brokers and financial advisers, you are on the frontline, helping clients navigate these tough times. It is essential to convey the importance of income protection, even when budgets are tight, and priorities seem to shift.
Why Income Protection Should Remain a Priority
Many clients are understandably anxious about their finances, with high interest rates and the cost of living putting pressure on household budgets. In such circumstances, insurance premiums might be the first expense they consider cutting. However, this is where your expertise as an intermediary becomes invaluable. Helping clients understand that while income protection may feel like an additional burden now, it could be their financial lifeline in the future, is key.
It’s important to remind clients that losing their income entirely would exacerbate their financial struggles far more than the cost of maintaining their current policy. For those who have little disposable income, the likelihood of having sufficient savings to fall back on is slim. Ensuring they retain some form of income protection, even if only partial, is far better than having no cover at all. This is where you can help them see the true value of what they’re paying for.
Addressing Misconceptions
One of the biggest hurdles in selling income protection is overcoming the misconception that it is too expensive. Many clients would however be surprised to learn how affordable it can be once they receive a quote. And when you help them understand that it could replace their salary until retirement in the event of permanent disability, the long-term benefits become clear.
Another misconception revolves around the perceived value of disability lump sum benefits compared to income protection. While lump sum benefits can appear attractive due to their large payout amounts, you can guide clients to see that a monthly income replacement often provides greater financial security, especially in the event of long-term disability. Additionally, income protection’s attribute to also cover temporary disabilities—even those as short as seven days—offers a significant advantage that clients may overlook without your guidance.
Income Protection and Critical Illness Cover: A Powerful Combination
It’s beneficial to educate clients on how income protection and critical illness cover complement each other. Rather than being substitutes, these products work together to provide comprehensive financial security. Income protection covers the loss of earnings, helping to maintain a client’s standard of living, while critical illness cover addresses the additional costs that arise from a severe health condition. As an intermediary, highlighting this synergy can help clients appreciate the comprehensive protection these products offer together.
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Adapting to Clients’ Evolving Needs
The world of work is constantly changing, with side hustles, career changes, and retrenchments becoming more common. This evolution necessitates a shift in how we think about income protection. At Sanlam, we have responded by enhancing our offerings to better meet these changing needs. For instance, we’ve introduced features that continue to cover clients’ occupations even if they temporarily stop working, and added comprehensive impairment cover that pays out independently of a client’s ability to work. And our practice of not requiring clients to let us know if their occupation changes, provides further certainty within this ever changing landscape.
As an intermediary, you play a crucial role in helping clients ensure that their cover remains relevant and robust, no matter how their career paths or personal circumstances change.
Innovations That Expand the Market
Traditionally, income protection has focused on medically insurable individuals, covering loss of income due to illness or injury. While this remains the core need, our latest innovations broaden the scope. For clients who are medically uninsurable, our accidental income benefits provide crucial cover against accidents, ensuring they too can protect their income. Additionally, our death income benefits offer a steady income stream to beneficiaries—an attractive option for clients, especially single mothers, who want to ensure their dependents are financially secure should they pass away. The option to pay this income into the Sanlam Guardian Trust adds another layer of security, giving clients peace of mind that minor beneficiaries’ needs will be met responsibly.
When you actively identify individuals who can benefit from these innovations, you help expand the reach of income protection products and the value they offer.
The Future of Income Protection and Your Role
The future of income protection lies in continuous innovation and, importantly, in client education. While product enhancements are vital, many clients still only buy lump sum disability cover simply because they don’t fully understand the benefits of income protection. This is where your role becomes even more crucial. By actively participating in our ongoing income protection awareness campaigns and taking the time to educate your clients, you can help them understand the role and value of income protection cover. When a client understands that their greatest asset is their ability to earn an income and how an income protection policy can protect it, you are one step closer to safeguarding another financial future.
In conclusion, as an intermediary, you are instrumental in helping clients recognize the unsung hero that is income protection. In these financially challenging times, guiding them to maintain or consider income protection could be the most important advice you offer. While it may seem like a difficult conversation now, ensuring your clients have the right cover in place will protect them from far greater financial hardship down the line.