The cover you actually need in tough economic times
Published on 7th May, 2020 at 03:33 pm
The COVID-19 pandemic will become responsible for millions of lost jobs and earnings as a result of companies shutting their doors and laying staff off after services were cut dramatically or stopped altogether as was done in the restaurant sector.
While COVID-19 is expected to be a once-in-a-lifetime event, that’s not to say that your family is shielded from other events that could impact on your financial livelihood. Illness, injury and even death could mean a family will lose their income.
Here we unpack the critical types of cover you actually need in tough economic times, whether you are an individual or a business owner, and how they could be beneficial:
Cover you actually need: sickness benefit
This product insures you against the loss of income, and enables you to maintain your lifestyle and take care of your family. Once activated, the policy will make regular payments when you have been booked on sick leave by a medical practitioner due to illness, injury or pregnancy complications.
This policy is available through Sanlam for graduates and certain professionals. It can be structured how you want with options for seven, 14 and 30-day waiting periods, with pay-outs lasting from three to 24 months.
“There are a list of professionals to which this cover is offered such as doctors, accountants, vets and certain company directors. It’s an elite product. The higher the income you have, the lower the premiums are,” explains Joanelle Smit, financial planner and director at Spectra Plan BlueStar.
Why is this cover you actually need? In tough times, losing income because you’re sick can be devastating – particularly if you are the primary breadwinner. Once you’re sick, it’s extremely difficult to get a competitive premium for a product like this.
Cover you actually need: temporary and permanent disability income benefit
This provides cover in the event you become disabled on a temporary basis following, for example, a heart attack or broken arm. It is defined as cover that kicks in when a policy holder is ‘continuously unable to fulfil a substantial and material part of the duties of the regular occupation that he or she practised for income immediately before the disability’.
The cover can last up to 24 months and has a typical waiting period of a month.
Smit explains: “Permanent disability means you can’t look after yourself anymore or you can’t do your job anymore. It also applies if you lost two hands, two feet or two ears.”
Why is this cover you actually need? You insure your car and your home, but arguably your most important asset is yourself, and your ability to earn an income. Insuring yourself against the unknown can help to secure the wellbeing of yourself and your loved ones, whatever life may throw your way. The younger and healthier you are when you take this kind of policy out, generally the more affordable it is.
Cover you actually need: overhead expenses protector benefit
This is an insurance that can be purchased by qualifying business owners. There are various restrictions on who can qualify based on the number of employees the business has and the way in which the business is structured – so it’s vital to read the terms and conditions.
Smit explains: “The overhead expenses benefit is taken out by the director of the company to cover the expenses that can occur should he or she not be able to work and generate an income. You should be able to show a loss of income to get the cover.”
Why is this cover you actually need? In tough or uncertain times, business owners are often among the most at risk. The responsibility you have to employees and your family can be overwhelming, and this kind of cover can alleviate a lot of worry and concern.
The cover you should never cut during tough times
When times are tough it may be tempting to relinquish such insurance policies under the financial pressure of it all. But Smit advises against this approach. “I’d rather advise my clients to take less cover and the best cover than none at all.”
She adds: “Anything can happen in the world that we live in. I worry personally about accidents and the crime rate. Statistics show that if something unforeseen happens to you your budget actually expands. Cover is important because we don’t know what the future holds.”
If you’re in any doubt about what to do with your money when you fall on hard times, it’s best to contact an accredited financial planner. They could help you in tough situations to ensure you still have the cover you need to fall back on while ensuring your premiums are affordable until you get back on your feet. Get in touch with one today.
Reality Plus and Health members also enjoy up to 30% off Sanlam risk products. Click here to learn more.
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