Prepare yourself so reality does not bite

What caused your financial reality check? A recent survey of 900 respondents by Sanlam Individual Life showed that major milestones often lead to financial reassessments. For 33% of respondents, becoming a parent was the reality check they needed to get their finances in order. Other reasons included losing a job or a death in the family.

Petrie Marx, Product Actuary at Sanlam Individual Life says, “At every life stage, there is a need to relook one’s financial plans and risk cover. Insurance is a key aspect of any financial plan and so is the right advice. Having a professional in your corner will help ensure your needs are holistically addressed in every phase you move through.”

When The Reality Check Moment Hits
There are several reasons why people delay getting insurance, for example, many feel the perceived risk of an unexpected event is too low or that cover is too expensive. It often takes a “reality check” moment to convince someone to re-evaluate these reasons and put in place the necessary protection for the future.

Marx says, “These moments are often exciting milestones, like becoming a parent (33%), buying a home (23%), or getting married (15%). Sadly, they also include reality checks like divorce (8%), losing a job (29%), a death in the family (24%), or a familial illness (14%). These wake-up calls often happen when we least expect them. That’s why it’s imperative to plan for the worst while hoping for the best.”

Financial reality checks come in all forms. According to Sanlam Individual Life’s research some of the most common ones are:

1. Starting Your Career
One of the biggest milestones to consider when thinking about your cover needs is when you start your first job.
Marx says, “When you start your first job, you have roughly 40 earning years – or 480 pay-cheques – ahead of you, so the risk of potentially losing your ability to earn an income would come with a devastating impact. Income protection or disability cover is therefore of utmost importance. Additional death cover can also be put in place to avoid burdening your family with student debt.”

Marx adds that Sanlam Individual Life’s 2021 claim statistics show that 57% of income protection claims are paid to those younger than 45 years. “We need to empower more young people to access affordable income protection options to enjoy greater financial confidence.”

2. Getting Into A Serious Relationship
Starting a serious relationship can have far-reaching implications for your finances. This could include combining your finances, buying a home together, getting married and having children.

Marx says, “When you get married or buy a home together, it is important to cover your debt with credit life insurance and some additional death cover. Consider both long-term debts like a mortgage and short-term debts like credit cards and personal loans. The next, and perhaps biggest reality check moment in life, is becoming a parent. Having death cover and sufficient income protection as well as disability cover becomes necessary to ensure that your children are provided for.” This reality is even more pronounced for single parents, or in cases where wider family members are dependent on you to provide for them.
Last year, Sanlam Individual Life paid 82% more for death and funeral claims than it did in 2020, largely due to Covid-19. This is a clear indication of the devastating effect that something unexpected like the pandemic can have on one’s life and one’s family.

3. Illness and Disability
Illness can strike at any point in your life and can affect your health as well as your finances. One Sanlam client - a 50-year-old doctor - developed stage 3 breast cancer. Had she not been protected; this difficult time may have been even more challenging due to financial pressures. Fortunately, she could claim under her severe illness cover which helped her manage financially while she was undergoing treatment.

According to Sanlam Individual Life's 2021 claims statistics, 71% of sickness and 57% of disability claims are paid to clients younger than 45 years. 56% of severe illness claims were paid to clients younger than 55 years old with cancer as is the biggest contributor. These statistics show the importance of having sufficient cover in place throughout your life and not just when you are older.

Living confidently starts with something as simple as drawing up a monthly budget, assessing the risks one faces and then seeking advice on how to manage these in the most cost-effective way possible. Marx concludes, “We understand the financial pressures faced by so many South Africans and how daunting it can be to juggle day-to-day needs, let alone plan for life’s curveballs. Our goal is to help people prepare for any eventuality, so they’re financially prepared for any reality check moment.”