Kresantha Pillay, Lead Specialist: Lifestyle Protector at Liberty Group
If there is one thing the COVID-19 pandemic has taught us in recent weeks, it’s that income protection has never been more important.
The current month-long lockdown has led to widespread anxiety, and major economic hardship for our clients and their businesses alike, but right now our advice to all those affected is that income protection is paramount.
As more and more of our clients are looking for ways to cut costs as they grapple with salary cuts and diminished working hours, advisers across the board are recognising the importance of income protection and trying to provide advice from this newly learned perspective. The current outbreak has shown us that unexpected hardships can be around every corner.
A recent survey by credit reporting agency, TransUnion Africa, revealed almost 80% of South Africans have lost a portion of their household income due to the pandemic, while one in ten had already lost their jobs. A further 7% of South African adults said they believed their income will continue to suffer in the future.
On average, the respondents said they believed they would fall short by about R7000 per month.
Meanwhile, the recently established COVID-response organisation, Business For South Africa (B4SA) has estimated the economy could contract by up to 10% with over one million people facing unemployment because of the impact of the virus.
As Liberty, one of our founding principles is “remembering the humanity in what we do”, and this maxim has never been truer in such an unprecedented situation. One of our current challenges has been putting in place continuity plans, even while there are still so many unknown variables that could emerge in the coming weeks. Our contingency plans are a balancing act – promoting operational effectiveness and appropriate risk mitigation action while providing certainty of cover for our existing clients, all the while still offering suitable cover to potential clients.
In the short term, we have put in processes for clients in financial distress who cannot maintain their full premiums, however, we have stressed the importance of continuing with full cover.
The Benefits of Income Protection
Lockdowns across the world have shown how rapidly businesses are changing, with millions of people having to adapt to working from home. The workplace is evolving, and new working-styles are emerging, such as ‘giggers’ and ‘slashers’. Slashers are those who have taken on more than one job to battle economic hardships, while giggers take on short-term work as part of the gig-economy.
There’s been an upward trend of people taking on so-called ‘side hustles’ to make ends meet, and this will likely continue to rise as part of the aftermath of the pandemic. Therefore, it’s becoming more important to protect your total income, and not just one stream.
Last year, we enhanced our Income Protector under Lifestyle Protector, alongside our benefits such as Bonus Cover and Retrenchment Protector, to include the ability to cover income from dual occupations – which was a market first. It’s given peace of mind to our customers because their total income is covered. The Income Protector pays you a monthly income if you can no longer work due to illness or injury. Depending on your coverage, it can replace your entire monthly income or a portion of it, regardless of whether your inability to work is temporary or permanent.
Cost of Income Protection
Many believe that income protection benefits are expensive, but this is a common fallacy.
For example, a 30-year-old male earning a net salary of R32 000, income protection could cost just *R220 per month. It is important to consult with a financial adviser to help guide and understand your unique risk needs and budget in order to select cover appropriately. For many young people, insurance is seen as a grudge purchase, and they believe there is no possibility of becoming disabled or unable to work.
With over 2.4 million people affected by the Coronavirus, and 171 000 deaths**, it is of vital importance that your cover remains in place in the unfortunate event that you contract the virus. Many epidemiologists are suggesting that a vaccine may only be available by next year, meaning that the risk timeframe of being exposed to COVID-19 may be longer than originally expected. If you do happen to become infected, Liberty will pay out claims for all valid COVID-19 cases, if the relevant criteria are met, including submission of confirmed positive test results.
Beyond this, Liberty also offers a comprehensive range of cover. Life Protection covers you in the eventuality of your death and the financial impact it could have on your family. Lifestyle Protection covers the risk of being burdened with the cost of surviving and recuperating from some form of critical illness or unexpected traumatic event.
The current pandemic has been a time of anxiety and unpredictability, but we want you to know that you are not alone in facing these unprecedented challenges. If there’s one thing we can do as a financial services provider, it’s to give you peace of mind that if anything happens to you or your family, you’re covered.
- Risk profile dependent
This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations.