WHAT IS INCOME PROTECTION AND WHY DO YOU NEED IT?

It is human nature to think “it won’t happen to me.” The harsh reality is that an injury or illness can happen to any of us - at any time. If it does, it can impact your ability to do your job and earn an income leaving you and those who depend on you in a severely compromised position. It is for this reason it is said that your ability to earn an income is your biggest asset - because everything else depends on it!

Millions of us have pure life insurance, dread disease cover, or credit life insurance which is often added to the premium you pay in respect of loan agreements or credit facilities. Despite this the one protection policy every working adult in South Africa needs and should have is the one many of us don't have - income protection.

Income protection usually pays out until retirement, death, or your return to work, although short-term income protection policies are also available at a lower cost. It is important to note that income protection does not pay out if you are retrenched.

Income protection is beneficial, amongst others, for the following reasons:

1. It ensures your income continues even if you can’t work.

None of us like to dwell on the thought that we could suffer a serious illness or injury. But every week thousands of South Africans find their lives unexpectedly turned upside down because of a health issue. If you have income protection, you will continue to receive your regular income even though you cannot work.

2. It can help you focus on recovery.

Financial stress isn’t helpful when you’re recovering from illness or injury. In fact, any stress can potentially be detrimental to your rehabilitation. Wouldn’t it be better if all you had to worry about was getting healthy again? If you have income protection you can focus on getting better rather than worrying about how you’re going to cover your monthly expenses.

3. Income protection insurance can be customised.

An income protection policy can be adjusted to your individual circumstances. You can choose to pay a higher premium, so your policy starts paying out seven days after you make a successful claim or opt to reduce your premiums by extending this period. You are also free to choose the period for which you wish to receive payment of the benefit.

4. You can use income protection insurance to care for a sick child.

One of the features that may be available is commonly called family care cover. Often a parent will choose to take unpaid time off from their job or business to support their child and worry about financial consequences later. If you have family care cover you will have less financial worry because you could be paid a monthly benefit. This benefit is paid for the period when the parent(s) stops working in their regular occupation to care for a dependent child too ill or injured to attend school or childcare.

5. It can help you stay on top of debt, even without an income.

When you get sick, your debt repayments don’t disappear. In fact, you might accumulate more debt due to an expensive recovery. Income protection can ease the pressure of managing those bills.

6. It can help you maintain your current quality of life.

Income protection is great for anyone who is worried they’ll have to drastically change their routine and lifestyle when they get sick or injured. Depending on your incapacitation, this may be inevitable. However, minimal financial disruption can make it easier to deal with your situation.

Statistically, it could happen to you. The risk of stroke and cancer is significant in South Africa, and while it’s unpleasant to consider this happening to us, we can’t ignore the possibility.

Out of all the claims paid out by Liberty to males age between 35 and 44 in 2020 41.80% were paid for loss of income protection and, out of all the claims paid out to females age between 35 and 44 in 2020 43.10% were paid for loss of income protection.

A substantial portion of all income protection claims occur because of accidents. No matter how healthy a life you lead, you certainly can’t account for accidents.

The bottom line is that income protection provides security. At the end of the day, you’ll be grateful that you have it, when you need it.