Layered protection: structuring death, disability and illness cover by life stage

Many South African customers are over-insured for death yet significantly exposed to the cost of surviving a life-altering event.

Financial advisers are being urged to rebalance traditional risk portfolios, which often prioritise life cover, to better reflect real-world threats such as cancer, stroke, and even autoimmune conditions that are increasingly prevalent during prime working years.

It’s a shift that Henri Le Grange, Certified Financial Planner® at Old Mutual Personal Finance, believes is long overdue. He says the weighting of death, disability, and critical illness cover should evolve as customers move through different life stages. “Your financial risks don’t stay static. When you’re young, with no dependants, death cover might not be your biggest priority. But severe illness and disability become far more relevant, especially as medical treatments become more expensive and are not always fully covered by medical aid.”

Old Mutual’s latest claims statistics show that severe illness remains the leading cause of claims during the prime working years. But these aren’t always the life-changing conditions people expect. Le Grange says that while cancer and heart disease feature prominently in the national data, his own practice tells a broader story.

“Most of my severe illness claims over the past two years have come from customers between 40 and 55, and increasingly, anecdotally, for rheumatoid arthritis,” he explains. “It’s an autoimmune condition that isn’t life-threatening, but it’s completely life-changing. It can mean adapting your home, cutting back your workload, or managing lifelong treatment costs, which requires liquidity, not just life cover. That’s why regular rebalancing of protection is so important.”

Recalibrating Cover as Customers Accumulate More
As people get older and build up more savings and investments, their insurance needs should become more nuanced and strategically structured. “Technically, as you gather more liquid assets your need for life cover will go down. However, on the other side of that, your estate duty will increase,” says Le Grange.

Cover needs should evolve from income replacement toward estate liquidity and protection against health-related risks, a shift that calls for sophisticated financial planning tools to guide the rebalance. “We need to build models that illustrate to customers the impact of death, disability, illness, or retirement on their cashflow over the course of their lifetime,” explains Le Grange.

“With those models, financial advisers can shift from product to plan. They can guide customers not only on what cover to have, but also when to have it, how much to hold, and why it matters.”

This method reframes insurance as strategy rather than a hard sell. For instance, a cancer diagnosis is not just a medical issue; it is a liquidity test, a disruption to income, and potentially an estate pivot point. “Modelling helps reconcile affordability with coverage adequacy across the customer’s lifespan. It also highlights a common blind spot, which is the mistaken belief that cover is no longer necessary after retirement,” he says.

Cover That Must Extend into Later Life
The need for protection does not vanish when we stop working. Le Grange emphasises that many customers with existing cover find themselves underinsured later in life. “The likelihood of a severe illness event is higher than a disability event as you get older,” he warns. “If you get any illness in your old age, you don’t have to dip into your retirement savings to cover the costs.”

Furthermore, for older customers, maintaining protection grants choice. “I would want to be treated by the best person in the country or even the world. It gives you the freedom to make health and lifestyle choices that might otherwise be limited if you don’t have the financial means at that stage,” says Le Grange.

But this only works if portfolios are viewed as part of a holistic financial plan. “Nothing is in isolation. Disability and severe illness form part of a holistic financial plan,” he says. “Everything must be considered within the context of an overall strategy, not treated as an isolated event or standalone product.”

Practical Advice for Financial Advisers:

• Start with a needs-based analysis and link cover types to actual life-stage risks
Every customer’s financial plan must be reviewed in the context of their current needs. Everything should be viewed holistically as part of a complete financial plan, not as an isolated product decision.

• Educate customers early as young people benefit from low premiums and long-term cover
Young customers should be encouraged to take up severe illness cover early, when it’s most affordable and easier to obtain. A 20-year-old, for example, can secure R1 million in cover at a fraction of the cost compared to taking it out later in life, when premiums are higher and medical underwriting becomes more stringent.

• Assess group scheme gaps and don’t assume employer cover includes everything
Employer benefits often focus on death and disability cover, while severe illness is frequently excluded or covered only for nominal amounts such as R40,000 or R50,000.

• Match product to purpose as severe illness cover isn’t a substitute for disability, and vice versa
Each risk product plays a distinct role in a customer’s portfolio. Disability cover answers the question “can you work?”, while severe illness cover answers “do you have the illness?”, meaning both serve different financial functions.

• Review regularly — every life change warrants a review
Risk needs shift over time, requiring financial advisers to adjust cover accordingly. Regular reviews ensure that cover remains aligned with the customer’s changing financial situation.

• Watch for Underinsurance in Severe Illness Among High-Income Customers
High-income earners may assume they are well protected, but they often lack adequate severe illness cover. Many young professionals rely solely on personal severe illness cover, as employer schemes rarely include this risk.

• Compare definitions, not just price, as poor definitions result in declined claims
Policy wording can be the deciding factor as to whether a claim is paid or not. A heart attack definition requiring only one out of three diagnostic criteria can lead to more successful claims than one requiring all three.

“Our job as financial advisers isn’t just to sell policies,” concludes Le Grange. “It’s to build financial plans that are resilient, realistic and relevant. Plans that protect not only income but also dignity.”