Why income protection is important for millennials

Henk Meintjes, Head of Risk Product Development at Liberty.

Many employed South Africans are not adequately protected against the risk of a disability which can impact their ability to earn an income, says financial long term insurer Liberty. This type of risk cover is either not well understood or not taken seriously.

Millennials in particular believe that ‘it won’t happen to me’ or ‘I’ll be able to overcome that’, but they too, stand to lose from a disability or a life event that may not allow them an opportunity to earn an income. 

Liberty’s latest Claim Statistics show that millennials claimed mainly for income protection benefits in 2015, with retrenchments being the main cause of claim (at 15.9% of all claims for this segment). 

“As the South African economy struggles to regain momentum, we have seen a steady increase in retrenchment claims. But this is not the only reason for income protection claims in this segment. Even millennials face the risk of disability due to illness or accidents – yet there is very little understanding as to why one should protect or insure their ability to earn and income,” says Henk Meintjes, Head of Risk Product Development at Liberty. 

Meintjes says that income protection cover, although part of a broader lifestyle protection solution, should be the first thing that a young person should discuss with an accredited Financial Adviser. “At the onset of your career, get an accredited Financial Adviser to walk you through the journey of what cover is relevant for you. At the start of your career, discuss income protection so as to ensure that your future earnings aren’t lost should you be disabled. It is also essential to maintain this cover later in life so that you can continue to fund the lifestyle that you become accustomed to through earning a salary,” he says. 

How does income protection work?

Injury, illness or retrenchment can occur suddenly and affect your ability to earn an income for an unpredictable amount of time. You will need to cover your living expenses to maintain your lifestyle during this period as well as continue making contributions towards your savings and investments. Taking out income protection for a monthly fee will help you do this. You will then receive a specified percentage of your salary for up to 6 months following retrenchment or for as long as you are unable to work (up to retirement age). 

“This youth month, make sure you speak to an accredited Financial Adviser about protecting your income,” concludes Meintjes.