Karen Bongers, Product Development Actuary at Sanlam Individual Life
The “it won’t happen to me” mindset is human nature, but unfortunately, the likelihood of being unable to work due to illness or injury is higher than one might think. 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 being able to earn. Intermediaries can play a pivotal role in helping younger clients mitigate against this risk.
Younger clients often believe that income protection is unnecessary until they are older, but this is not the case. Our 2020 claims statistics show that 46% of income protection claims came from individuals between 26 – 45 years 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, this is 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.
Hope for the best but be prepared for the worst
Here are two real life case studies – both Sanlam clients – where having income protection made a massive difference. You may find these examples useful when discussing the need for income protection with your clients.
In November 2019, prior to lockdown and the normalisation of work-from-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 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 as very few households are likely to have emergency funds to ‘cover’ a lost income for more than one or two months.”
In conclusion, having income protection provides financial security when life throws unexpected curveballs. We are proud to work with our intermediary partners to empower younger clients to make the right choices now to protect their tomorrow.