A study conducted a few years ago on behalf of the Association for Savings and Investments in South Africa indicated that over 12 million of the country’s workforce were underinsured in terms of life and disability cover. Furthermore, reviews by various insurance companies highlighted that this shortfall fell primarily in the realm of disability cover.
In the event that you are not able to completely (or partly) perform your usual professional duties as a result of a medical condition, impairment, or trauma, then sickness and incapacity benefits are vital in order to ensure your monthly income is covered or supplemented. No insurance company will issue long-term insurance once you have been incapacitated, so it is important to prepare for any unforeseen events in advance and understand the details of your cover. ‘Just in case’ is better than ‘simply too late’.
Your gross professional income will determine the amount for which you can apply, and it is important to acknowledge the value of monthly benefits that will pay out until retirement age, rather than only focusing on lump-sum benefits. If you are employed by a company, you can cover not only loss of income, but also any benefits — such as travel allowance, medical aid and retirement contributions — and even average performance bonuses. If you are self-employed, you can cover the salary that you withdraw from your business, as well as your share in net profits and business expenses.
Depending on your chosen insurance provider, sickness and incapacity benefits may be offered as one product or as three separate products — (1) sickness benefits, (2) temporary incapacity benefits, and (3) permanent incapacity benefits.
A permanent incapacity benefit follows as a natural progression from a sickness benefit. This means that, after you have claimed from your sickness benefit for a certain period of time, if your condition is permanent, your monthly benefit will then be paid from the incapacity cover until the specified retirement age.
When disability claims have been analysed, many insurance companies have found that South Africans tend to only be covered for permanent disability. However, many claims are actually as a result of a temporary disability. For example, unless you are a professional athlete, if you lose or injure a limb, you won’t be regarded as permanently disabled and you will not be able to claim for a permanent disability. Granted, you will need to make significant adjustments to cope with the life-changing circumstances, and you may require a substantial amount of time off work, but you should ultimately be able to return to your job. In an event such as that, you would need to be protected by having sickness and/or temporary incapacity benefits.
Benefits can vary depending on your insurer but, generally, listed pregnancy complications are automatically covered (so long as claims criteria are met). A benefit will also be paid in the event of hospitalisation for four or more days due to a pregnancy-related condition.
You will also often be entitled to a Family Responsibility Benefit, which allows you to take time off work if one of your family members is hospitalised. This can also provide funds that can be used to cover any non-medical costs that occur as a result of hospitalisation.
When considering sickness and incapacity benefits, you may wish to also add benefits, such as the Child Terminal Illness Benefit and the Child Death Benefit, which enable you to cover costs and support your family during this tragic time.
A Hospital Benefit may also offer extra peace of mind, as this pays an additional amount equal to the sickness benefit if you are hospitalised for four consecutive days or more.
It may be worth considering a Permanent Incapacity Booster as, in the event of permanent incapacitation, this will automatically increase a partial monthly payment to 100% until you reach the selected retirement age.
Whatever benefits you decide to include, it is important to understand the fine print to ensure that you are covered in the face of any disaster — be that temporary or permanent. For example, waiting periods can vary significantly — some insurance companies pay out if you are booked off work for more than seven days, and payment is made retrospectively from the first day; while other insurers have a much longer initial waiting period, and you will not be able to claim your policy if you are booked off work for less than this time. When making your decisions, you may, therefore, need to consider how long you can cope with a loss of income.
Don’t hesitate to arrange a meeting to discuss your options and ensure you are covered in the event of all eventualities.
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