Busting three myths on Income Protection

Durban - Every year, many South Africans make the wise choice to invest in life insurance, recognising the importance of securing their loved ones' futures. However, while death is an inevitable aspect of life, there exists a far more pressing risk that often goes unnoticed: the possibility of being unable to work due to illness or injury.

Recent research conducted by Bidvest Life has unveiled a staggering statistic – a 30-year-old male has a mere 15% chance of passing away before the end of his working years, yet a 91% chance of being unable to work for a period of two weeks or more during his career.¹

The question arises: if faced with such a predicament, how prepared are you to manage the financial implications? In reality the majority of us are unprepared, primarily because there’s just not enough awareness of income protection as an insurance category in South Africa, says Nic Smit, Chief Product Actuary at Bidvest Life.

“Your income is what pays for everything else – your medical aid, your house, your car, your groceries. Every working South African should consider the financial impact if they’re unable to work for a certain period due to illness or injury. Even temporary setbacks can quickly spiral, with long-term financial consequences,” says Smit.

Breaking Down the Barriers to Income Protection:

Addressing the misconceptions around income protection is key to empowering South Africans to make informed decisions about their financial futures.

Myth: Income protection is expensive

Reality: Contrary to popular belief, income protection is far more affordable than you might imagine. For example, a 35 year old male who earns R30,000 a month could protect 100% of their income against the risk of injury or illness until the day they would have turned 65 for R382 a month^*. You can also choose to insure less than 100% of your income, with a minimum cover of R1000 per month.

Myth: Income protection is solely for full-time employees, or earners with a consistent and stable monthly income

Reality: This assumption couldn't be further from the truth. Whether you are a small business owner, a self-employed individual, a freelancer, a commission earner, an artist, a musician, a student or even a homemaker, income protection is designed to accommodate a wide range of occupations.

Myth: Income protection doesn’t pay out

Reality: Bidvest Life paid 92% of all claims made in 2021. The leading cause for the remaining 8% of non-payments stemmed from clients attempting to claim within their waiting periods. It's essential for South Africans to discuss and understand their waiting periods with their financial adviser before taking out cover, as the waiting period determines the number of days a policyholder must be sick or unable to work before a claim will start paying.

“Many customers think they’ll be able to fall back on sick leave, savings or even skimp by for a month or two if they can’t work. The fact is that for many South Africans, a three-month interruption can have dire financial consequences. Income Protection solves for what really matters: protecting yourself, your business and your family against unexpected expenses incurred due to illness, injury or disability,” says Smit.

The adage "hope for the best, prepare for the worst" rings especially true when considering the financial repercussions of being unable to work due to unforeseen circumstances. By challenging the myths around life insurance, and specifically income protection, South Africans should be better equipped to recognise the value of their income and take decisive steps toward establishing their financial security.