Nic Smit, Product and Pricing Executive at Bidvest Life
When was the last time you had a real conversation with your clients about what disability cover should do? And, equally importantly, what it often fails to do? How illness and injury affect our ability to earn an income is complex, and it’s time to ask whether traditional approaches – like defaulting to lump sum disability cover to insure against lost income, are serving you as the adviser, or your clients, as comprehensively as they should.
The reality is that most working South Africans are far more likely to experience a temporary disability, something that keeps them from earning an income for the short term, than a permanent one. Yet the traditional way of insuring against disability risk, relying solely on lump sum benefits that only pay out for permanent disability – leaves clients financially vulnerable in times of temporary injury.
Data shows just how real this vulnerability is: a 30-year-old male has a 91% chance of being unable to work for a period of two weeks or more during his working career1 and, in 2022, Bidvest Life saw over 200 times more income protection claims than lump sum disability claims2. These temporary setbacks wouldn’t have met the permanence threshold required for a lump sum payout and, without income protection, these clients may have faced insurmountable financial challenges.
However, income protection alone isn’t the complete solution either. Combining the best of both worlds, regular monthly payouts, plus the option of a once-off lump sum in the event of permanent disability, is the most effective way to match real-life needs. Monthly payouts ensure clients can continue to meet their day-to-day expenses while they’re unable to work, while a lump sum helps with once-off costs like settling debts, retrofitting a home for accessibility, or buying specialised equipment such as an adapted car.
Renasa has always been the broker’s best friend.
Our entire business focus is exclusively on helping our intermediaries outcompete their competitors.
Now, as part of TIH, South Africa’s powerful insurance group,
we commit to do even more for our brokers.
RENASA’S ALWAYS BEEN A SAFE PAIR OF HANDS FOR US, BUT NOW THEIR STRENGTH AND STABILITY IS NEXT LEVEL.
- Renasa is now proudly part of TIH, a successful international financial services institution.
- GCR has now further upgraded Renasa’s national strength rating to A, reflecting support from TIH.
- Furthermore, GCR’s outlook is for “Renasa’s earnings to further complement capital injection(s) from TIH, enhancing the insurer’s solvency and liquidity level”.
Renasa is a licensed non-life insurer and FSP. Telesure Investment Holdings (Pty) Ltd. All Rights Reserved. TIH is a licensed controlling company.
So, how can you prioritise monthly payouts while still offering your clients a lump sum option, without compromising affordability? One powerful answer is Bidvest Life’s Extended Income Protection with Commutation Plus. This innovative new version of the Commutation Option enables clients to commute up to 100% of their monthly payout into a once-off lump sum on permanent disability. The Standard Commutation Option, which limits commutation to one-third of the monthly payout, remains. Now, advisers and clients have flexibility to choose the option that best suits their needs.
The result? Comprehensive protection at a lower premium. As an example, a 40-year-old male with R1.2 million in Disability Lump Sum cover would pay R229.52 per month. But choosing Extended Income Protection with a R10,000 monthly benefit and the Commutation Plus Option (that could be commuted to pay R1.2 million in the event of permanent disability) would cost just R147.28 per month, saving 36%*.
Another conversation you should be having is about how income protection benefits actually work. Many products appear to be like-for-like at first glance but, when you drill down, they actually have vastly different benefits and limits. Some products will cover up to 100% of net income until retirement, even for temporary events. Others limit cover to a percentage of income for temporary events, only increasing to 100% if there’s permanent occupational disability or impairment. In some cases, a benefit may be limited for specific conditions. Understanding these product differences, and then aligning them with your clients’ financial goals, needs, and budget will help to determine the right income protection solutions.
And there’s another angle you can’t afford to ignore: the sustainability of your own business. Many financial advisers are facing a very real concern, in that their long-standing clients are ageing and their life insurance needs are declining. But, only offering lump sum disability cover, which is often more expensive, can make it harder to attract and retain the next generation who mistakenly believe that they don’t need life insurance yet. Income protection, on the other hand, is designed to cover the kind of risks that younger lives are more likely to face, helping you build a long-term, diversified book of business.
Ultimately, the industry has innovated to better meet the real risks your clients face, enabling you to shift the conversation from outdated assumptions to forward-thinking strategies. By embracing products that reflect modern risks, and understanding how to match them to each client’s life stage and financial plan, you can protect your clients’ incomes more effectively, deepen your relationships with them, and help secure your own future as well.
1Non-smoker. Retirement age 70. 2019 Risk Reality Survey
2Bidvest Life 2022 Claims Report
*Ts and Cs apply. Premiums are risk profile-dependent