Income protection is no longer a ‘ nice-to-have ‘ but has instead become a prudent necessity for any professional in 2021.
It’s not uncommon to go through life hoping for the best. It’s human nature to plan for the future. We work hard to provide ourselves and secure our families with a successful life. But sometimes, destiny intervenes, and the best-laid plans turn out to be less than perfect. It’s at this point that income protection becomes essential
Income protection Insurance affords you that assurance. Simply being retrenched, becoming ill, or becoming disabled, any one of these events could end up causing you to lose your future earning potential.
Income protection ensures you maintain your standard of living in case the worst should happen to you. Assuring financial feasibility until you find another job or reach retirement age.
What is income protection?
In short, income protection is a policy that replaces or supplements your income if you’re laid off, develop a critical illness or become disabled so that you can’t earn a living for a while, or permanently. It is a safety net during difficult times.
What does it cover?
Income replacement after retrenchment: In most cases, this coverage will cover your loss of income for six months after retrenchment. However, some policies include coverage for up to 12 months. Thus bridging the gap between your income and a new job.
Dread disease or disability: Cover for dread disease or disability should continue for as long as the condition persists, or until retirement age.
*Note: Not all policies cover retrenchment, be sure to check before you commit*
Do you need it?
If you’re young, healthy, and employed, income protection might seem unnecessary. But with high unemployment rates and the high-risk business environment caused by the disruptions of the Covid-19 pandemic, job security is no longer guaranteed.
South Africa’s unemployment rate reached 32.6% in the first quarter of 2021, Statistics South Africa (Stats SA) said. “The number of unemployed persons also remained almost unchanged at 7.2 million compared to the fourth quarter of 2020 – increased by 8,000. As stated in the QLFS ( Quarter Labour Force Survey) released June, 1st.
Anything can happen, and if you lose your income, you still need to pay your bills. If it happens that you fall ill and your sick leave is depleted or doesn’t cover long-term illness, income protection fills that gap too.
Job security during these difficult times is no longer a certainty. Make sure that you’re covered if something should happen to your income
You should consider income protection if:
- You have debt: It is extremely important for anyone who has debt to repay to consider income protection. In the instance that income stability is lost installments will still be paid.
- You’re the sole breadwinner: if your family depends on you financially for its survival, and there is no additional income stream, income protection would be a crucial benefit for you.
However, if you’re either self-employed or a freelancer, income protection insurance may possibly not be an advantageous policy, as not all income protection policies insure self-employed and freelancers for disability and critical illness, retrenchment is not deemed a valuable variable in this case.
In the event that your business could cease operating due to an event like the Covid-19 lockdowns, you may wish to consider business interruption insurance instead.
How much does it cost?
Each policy is circumstance specific and based on your individual needs, thus your premium will be determined by the policy you choose and the following factors:
- Your age.
- Your sex.
- Your job.
- Your industry of profession.
- Smoker/ non-smoker.
- Income amount to be covered.
- How long do you want the benefits to be paid out, 6 months / 12 months or till retirement age.
- Smoker/ non-smoker.
- Health history
Income protection has become more than a ‘nice to have in the modern circumstance the world has found itself in. In the midst of a pandemic, job security during these difficult times is no longer a certainty, with global leaders estimating a 10 year period before economic revival. Protect your future by insuring your biggest asset.
*Exerts of this article was originally published by Nedbank, read the original article here *