Category Life Insurance

Managing Financial Uncertainty through Risk Cover

22 November 2022 Liberty

“The past two years have been an eye-opener for just how quickly one’s lifestyle and livelihood can unexpectedly change. As a result, protecting against future uncertainty is top-of-mind for many income earners who have had to navigate uncertainty.

This is especially true for working professionals across the globe who are depended upon financially. In many cases, COVID-19 led to a re-evaluation of priorities, with many professionals looking for more meaningful ways to spend their time and money, both at work and in their personal lives.

Having all your risk cover with one insurer has emerged as a viable option to take away the hassle out of insurance admin; and provides you and your family with certainty that one insurer has a holistic view of your financial goals and risk protection cover. This is especially true for professionals between the ages of 25 and 35 who are starting their careers or striving to achieve high levels of expertise and excellence.

It is important to partner with an accredited Financial Adviser who will become your central point of contact with the insurer for all your risk cover needs. This will allow you more time to focus on building that aspirational career, knowing that the financial stability you are working so hard for is protected with the right cover, for you.

Kedibone Chuene, Chief Product Marketing Specialist at Liberty says, "combining all your policies with one Financial Services Provider (FSP) or taking up a policy like Liberty's Lifestyle Protector could help save you time and money, furthermore, it allows you to build a strong relationship with the insurer".

Check your financial privilege…at the door
Uninsured members of the middle-class have very little reprieve should a lifechanging event take place, like retrenchment or disability. For example, South Africa’s disability grant only pays a maximum of R1980 per month – an amount unlikely to support a household should a professional breadwinner be no longer able to work.

“We have seen the real impact of the pandemic, with a dramatic increase in claims reflecting the physical, psychological, emotional, and financial effects of COVID-19. Many professionals are now seeking certainty should the unthinkable happen again and are turning to the insurance industry for ample cover to protect themselves and their families,” said Chuene.

Furthermore, the 2022 Insurance Gap Study shows that the average South African earning an annual income of between R118196-R246922 would require a life cover payout of at least R1.98 million to maintain their standard of living should an earner die. However, the average South African earner had life cover of only R581 114, leaving a R1.405 million gap.

“There is a widening insurance gap in South Africa. There are also gender disparities in risk cover too, with more men being insured than women. Therefore, it is so important to speak to an accredited Financial Adviser to structure a comprehensive cover suited specifically to you and your needs and review your cover often in accordance with your evolving lifestyle and financial goals. said Chuene.

Lead by example; share, learn, and adopt adequate financial resources
There are four primary types of risk cover that one could consider.

1. Life Cover
Life cover (or life insurance) pays your dependants a pre-specified amount of money in the event of your passing. According to Liberty’s 2021 Claim Statistics, 61% of the total claims (R3.47 billion) the insurer paid that year were related to Life Cover for mortality events.

2. Income Protector in the case of retrenchment
Retrenchment cover pays you a significant portion of your monthly income for a stipulated period (whilst you are getting back on your feet), in the event of a loss of income as a result of retrenchment. Liberty’s 2021 Claim Stats showed that although retrenchment claims were not as high as in 2020, they do exceed pre-pandemic numbers seen in 2019 as many South Africans battle tough economic conditions. Females, according to the statistics, were more affected by retrenchment than men.

3. Income Protector in the case of a critical illness or disability
This lump sum pay-out is there to assist you with any expenses associated with lifestyle changes because of physical illness, mental illness, or disability. You can use the funds to cover potential unexpected costs incurred in treatment or recovery.

4. Education Cover
This benefit covers the costs associated with your child's education – from pre-primary to tertiary levels – should you become severely ill, pass away, or become permanently or occupationally disabled. Some insurers also cover associated costs like school uniform, stationery, transport, and residency.

Paying heed to the many tough lessons learned from the calamities of the past, professional income earners are seeing the value of comprehensive risk cover in mitigating future threats to their livelihoods.

However, purchasing risk cover is not a once-off decision. Professionals need to periodically re-evaluate their insurance policies, at least annually, or when their lives change and when a new need arises. Maintaining open lines of communication with a Financial Adviser not only assures that you get the right cover but also that you understand the value of the cover you are getting.

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