Millions of South Africans – especially those under 40 – are living on the edge, at risk of losing their incomes, quality of life and even their homes, as a result of being chronically underinsured in the areas of life and disability insurance.

The Association for Savings and Investment South Africa (ASISA)’s most recent Life and Disability Insurance Gap Study showed that earners younger than 39 years face an average insurance shortfall of R1.4 million for life cover and R1.5 million for disability. However, industry figures show that more than two-thirds of all salary earners will experience at least one disability in their working lives that will prevent them from earning an income, either temporarily or permanently.

Bani Schmidt Sales and Marketing Executive at Stangen Life Insurance said few South Africans saw their earning power as one of their greatest financial assets, which they should insure in the same way that they do their homes and cars.

“Disability insurance provides an income to people who are unable to work due to an accident or illness. If illness or injury stopped you from working for an extended period, would you be able to survive on savings or sick leave alone? Without your income, would you be able to pay everyday expenses like your bond, rent, groceries or school fees, and take care of your family and financial commitments? If the answer is ‘no’, you should be looking at some form of disability insurance,” said Schmidt.

There are three main reasons why South Africans are under-insured, says Schmidt:

1. People don’t understand their risks correctly. The biggest risk most South Africans face isn’t dying: it’s losing their ability to earn an income before they retire. Statistics suggest that your chances of having a so-called health event that causes temporary disability are 1 in 5, as opposed to a 1 in 8 chance of dying.

2. Consumers don’t understand the differences between different long-term insurance products, like life, disability, salary protection and funeral cover, which all serve a different purpose. Broadly speaking, the reason for the loss of income should determine the type of income protection policy you take out, starting with your biggest risks first.

3. The current economic situation. Covid-19 has affected the income of millions of South Africans. “But as people scramble to find ways to reduce their monthly expenses, there’s one monthly expense which should never be cancelled: your life and disability insurance. In a time of crisis, it’s more important than ever to protect yourself and your loved ones,” said Schmidt.

“The ASISA report suggests that you should look to replace around 75% to 80% of your gross income if something happens to you. But most South Africans tend to ignore the need for disability cover, saying ‘it will never happen to me’. The bottom line is that if you value your lifestyle, and that of your loved ones, you should be insuring yourself,” said Schmidt.


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Underinsured South Africans dicing with disaster