By Nic Smit, Chief Product Actuary at Bidvest Life
Income protection should be the first line of defence in any financial plan – but while it’s growing in popularity, many consumers remain unaware of this kind of cover, as lump sum-based life insurance continues to dominate the South African market.
With the rising cost of living, falling ill is a luxury many South Africans simply can’t afford. An illness or injury that prevents you from working and earning an income, even on a temporary basis, could spell financial disaster.
Here’s where life insurers and financial advisers have a critical role to play. By helping South Africans to be better informed about their real needs and risks, we can ensure they secure the right cover. It’s essential for customers to understand that insuring their income is the ultimate shield against life’s uncertainties. After all, it’s what pays for everything else.
The problem is that most individuals are far more likely to have lump sum cover in place compared to income protection cover – which could leave them without an income when an illness or injury strikes.
It’s estimated that more than six out of 10 (62%) of South Africans will run out of money within three months if they lose their income due to injury or illness.(1) Ask your clients: how long would they last without an income? What would be their next move? Which payments would they cancel first?
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They may think it’ll never happen to them. However, Bidvest Life’s research shows a 30-year-old male has a 91% chance of experiencing a temporary injury or illness that’ll prevent them from working for a period of two weeks or more.(2)
Income protection also presents a golden opportunity for financial advisers. It’s a compelling sell to a client who understands the financial impact even a minor setback can have on their income stream. Not only is income protection simpler to understand and often more affordable, it also outshines other benefits when it comes to the likelihood of claim – clients are much more likely to claim for income protection than any other life insurance benefit. In 2021, income protection benefits made up a staggering 92% of Bidvest Life’s claims.(3) It’s time for this to become the industry standard.
The bottom line? South Africans would look at life insurance differently if they knew what it could do for them. More South Africans need to hear the message that by prioritising income protection, they are better armed to face life’s curveballs and can do so with the confidence of having claim certainty. Right now, we as insurers and advisers can be relevant and show up for our clients like never before. It’s an opportunity we can’t afford to miss. Our future – and theirs – depends on it.
Bidvest Life Reality Check Survey, 2018
2 Non-smoker. Retirement age 70. 2019 Risk Reality Survey
3 Bidvest Life 2021 Claims Report