Motshabi Nomvethe, Head of Technical Marketing at PPS
They say as life happens, the unimaginable can become a reality. This unimaginable event could be an illness or injury, that affects an individual’s ability to work.
Being unable to work due to illness or injury can have a devastating impact on a professional’s finances and livelihood.
For the year ended 2019, PPS reported that it paid about R1.2 billion in claims for Sickness & Permanent Incapacity to its members.
Under the sickness benefit, musculoskeletal system and connective tissue disorders made up the highest percentage of claims, followed by injury and cancer. Due to the fact that professionals are living and working longer, there was a rise in claims for individuals over 60 years and 70 years, while 16% of claimants were under the age of 40 years.
This shows that professionals are likely to suffer an illness at a crucial time in their lives, when they are most likely at their highest earning potential. Additionally, professionals are also only having children later in life and may need to take care of them.
Professionals play a big part in contributing to the economy by driving innovation, ensuring governance, contributing to job creation and skills development and most importantly providing essential care to South Africans. This is evident especially during the COVID-19 pandemic, where medical professionals are putting their lives on the line to take care of the ill and halt the spread of the virus.
With the contributions that professionals make across various industries, any unforeseen circumstance could hamper their career or practice. With psychological disorders and depression on the increase, it is important that professionals are supported through these difficult times. This highlights the value of having the right insurance cover in place from a young and healthy age as the experience is that one may need it sooner than expected.
The biggest asset of professionals is their ability to earn an income, as this income stream supports them and their families. This is why professionals should consider having Sickness and Permanent Incapacity Cover, especially since many run their own practices and businesses.
The cover is designed to replace or supplement a professional’s monthly income for up to two years when they become totally or partially unable to work at any time during their career due to sickness or injury. After the two years is completed, should the policyholder still be totally or partially unable to attend to his/her usual professional duties, the Permanent Incapacity Benefit will kick in and will continue to provide them with an income until they are able to return to work, on death or retirement. When claiming for this type of benefit, a professional will not be required to prove loss of income.
Another advantage of the sickness benefit is that it provides professionals with sufficient time to recover, ensure that they are not financially strained, adjust their normal professional duties and change their work methods.
There are noteworthy differences between traditional income protection and the sickness benefits policies, which professionals should consider when doing their financial planning.
An income protection policy requires an underlying medical condition, illness, injury or disability to exist, for there to be a claimable event. Over and above being ill, one will also need to have experienced a loss of income, to qualify for such a claim and will not be payable from the first day of illness.
For example, a medical professional who works in their practice during their sick leave period, might not experience a loss of income. Therefore, an income protection policy will not pay out, whereas a sickness benefit would as they would have met the definition of being booked off ill and unable to perform their usual occupational duties.
Therefore, professionals need to look beyond income protection cover, and ask their financial advisers about Sickness and Permanent Incapacity cover.
Going forward, financial advisers should be able to answer the following questions: what financial planning needs do professionals have and is there a need for a sickness cover?
Are there any circumstances where it wouldn’t make sense to get this type of cover? What other types of plans are available?