The Importance of Income Protection
One of the many lessons we have learnt from the COVID-19 is that income protection is critically important for everyone who is employed. The loss of long-term income due to illness is possibly the biggest risk people face throughout their working lives and as such it is imperative that you protect yourself from that risk.
What would the impact be to your family right now if you were no longer able to work due to an illness or injury. Very few families in South Africa today would still be able to cover their financial commitments, making income protection essential.
“Joseph Phiri, certified financial planner at Alexander Forbes said that debt to disposable income for South African households has increased from less than 60% before 1994 to the current level of around 75%, which is higher than the long-term average of 70% according to the South African Reserve Bank (SARB).”
This means that South Africans are currently using debt to meet their financial commitments which in turn makes the income they do receive even more important. The knock-on effect of a young breadwinner losing their income, even just for 6 months due to an illness, is catastrophic. Very few people have enough savings to cover a loss of income for an extended period.
It is also important to note that this is not something that concerns older people, young people are at equal risk and need to ensure they are as prepared for any eventuality.
Income protection explained.
Income Protection versus Disability Cover
While these two terms are often used interchangeably there are some marked differences. Income protection pays a monthly income to you if you are unable to work, temporarily or permanently, due to an illness or injury. Disability cover, however, pays a lump sum of money if you are unable to work permanently due to an injury or illness. Both of these covers are important and having both will ease the financial burden should you find yourself out of work.
Who qualifies for income protection?
Anyone who is employed, has a qualifying occupation and can be medically insurable can take out income protection. If you are not sure if you meet these requirements, you can talk to one of our Financial Advisors who will answer all your questions.
Is Impairment Cover included in Income Protection?
A permanent impairment can place a great burden on your finances with additional monthly expenses, even if you are still able to work. There are certain products that do include impairment cover.
Income protection is essential, but it is important to make sure you find the right protection for your family. The best way to do this is to speak to one of our qualified Financial Advisors who will assess your situation and then find you the best protection.