4 Types of personal risk cover you can’t afford not to have

Last updated on 14th March, 2024 at 12:49 pm

Having the right personal risk cover is critical to ensuring peace of mind. Alongside a long-term savings strategy, this ensures that you and your dependants are taken care of, no matter the circumstances.
Reading time: 3 minutes

In this article, you’ll learn:

• About different types of long-term personal risk cover.
• The benefits of each type of personal risk cover.
• Which types of personal risk cover make sense for each life stage.

“Risk cover and [retirement] savings are two sides of the same coin.”

This is a principle that Petrie Marx, product actuary at Sanlam, lives by when looking at risk cover as part of a financial plan.

“Retirement savings are intended to eventually replace your income, while risk cover manages the same need for an income while you’re still of active employment age,” explains Marx. Having only one of these can leave your financial future at risk.

This highlights the necessity of risk cover that includes life, income protection, disability and severe illness cover. The question is, what do all these types of risk cover do, and in which scenarios do they have the biggest impact?

What you need to know about income protection

This protects against a loss of income due to an illness or disability preventing you from working.

“It can also protect you against shorter term or temporary income loss that may leave a household vulnerable if not addressed,” says Marx.

Who is it for?

This cover applies to all income earners – from the moment you start to earn an income. Even if you have no dependants or other obligations such as student debt, your ability to earn an income remains your biggest asset.

“This is why income protection is encouraged from day one of earning an income, particularly if you are self-employed”, notes Marx.

What you should consider?

• This type of risk cover is paid out as a monthly income, after an applicable waiting period
  The amount of cover and waiting period will be different for each person’s needs.

What you need to know about disability cover

Where illness or injury has permanently impacted your ability to earn an income, disability cover is critical.

This provides funds that could be put towards the additional expenses associated with a disability.“Built-in impairment cover also protects clients against the cost of living with an impairment, even if they can still work,” adds Marx.

Who is it for?

Disability cover is important for everyone, as the cost associated with lifestyle changes and assistive devices can be enormous.

What you should consider?

• Disability cover provides you with peace of mind that you are able to make the necessary changes, without adversely affecting your financial wellbeing. This benefit can be taken in addition to the monthly income cover, or as a larger lump sum amount.

What you need to know about life cover

The ‘cornerstone of risk cover’, as Marx terms it, life cover protects your loved ones financially in case of your death.

Who is it for?

While life cover is always a smart choice, it’s often most necessary when you have dependants that you would leave behind when you pass on.

The benefit can be useful to ensure they are financially cared for and aren’t saddled with any debts you may have.

What you should consider?

• “Cover may be paid earlier upon diagnosis with a terminal illness to get your affairs in order,” shares Marx.

What you need to know about severe illness cover

If you are diagnosed with a critical illness, there are often additional or unexpected costs that a range of other products don’t cover.

Here, severe illness cover is beneficial for easing this financial burden.

Who is it for?

It’s especially useful as you become more aware of your risk of illness. “Importantly, [the addition of this cover is beneficial] before those illnesses may affect you,” notes Marx.

He adds that the benefit from severe illness cover can also help you put savings in place for a period of uninsurability.

What you should consider?

• A cancer benefit is a form of severe illness benefit covering cancers, leukaemia, tumours, and some early cancers. “It’s mostly used for what is called ‘layering’ – taking out some additional, dedicated cancer cover on top of your comprehensive severe illness cover,” concludes Marx.

A qualified financial planner is best positioned to advise you on your risk cover needs, and recommend a solution suited to you. Book a meeting with one today.