Why young people should consider life cover before they have any ‘wealth’ to protect

For many young adults, life insurance feels like something to consider later, once they’ve built wealth, started a family, or accumulated assets worth protecting.

However, says Lulama Mrara, Regional Manager at Old Mutual Personal Finance, this mindset overlooks one of the most important assets that young adults have, and that is their ability to earn an income and build wealth.

As South Africa celebrates Youth Month, Mrara says young adults should rethink how they view wealth and the role that life cover plays in protecting their financial future.

She says there are three important pillars of financial planning, being wealth creation, wealth preservation, and wealth protection. Life cover, she says, is a critical part of the third pillar.

“Life cover is the foundation of wealth protection. It protects the ability to build and preserve wealth,” says Mrara.

One of the biggest misconceptions among young adults is that they do not need life insurance because they do not yet have significant wealth to protect. They may not own a home, drive an expensive car, or have accumulated valuable assets, and therefore believe that life insurance can wait.

Mrara challenges this view, saying young adults need to broaden their understanding of what wealth really means.

“Your ability to earn an income is your most important asset. The house you buy, the car you drive, and the things you accumulate are all made possible by your ability to work, your skills, your knowledge, and your capacity to generate an income,” she says.

She explains that while many people think of assets as physical possessions, the income-generating ability behind those possessions is what makes wealth creation possible in the first place. If an unexpected event prevents someone from working, that foundational asset is placed at risk.

“If something happens to you and you can no longer earn an income, you can no longer continue building the future you imagined. Protecting your ability to earn an income is therefore protecting your legacy,” she says.

This need for wealth protection is reflected in South Africa’s broader insurance landscape. According to the Association for Savings and Investment South Africa (ASISA), the average South African earner has a significant insurance gap. According to the latest statistics from the savings and investments body, the average insurance gap was approximately R1.3 million, meaning that while the average earner would require about R2.1 million in life cover to ensure their family can maintain their standard of living after their death, they had life cover of just over R800 000.

The gap is even larger when it comes to disability protection. ASISA estimates that the average South African earner would require approximately R3 million in disability cover to maintain their standard of living if they were unable to work due to a disability event.

However, with the average disability cover of just over R1.2 million, this leaves an estimated disability insurance gap of around R1.8 million.

Mrara says these figures highlight the importance of viewing life cover not only as protection for dependents, but as protection for an individual’s financial future.

Life cover is designed to provide that protection. Mrara explains that comprehensive cover can include benefits such as disability protection, severe illness cover, and, in certain circumstances, business insurance.

“If you become disabled and can no longer work, disability protection provides financial support. If you are diagnosed with a severe illness, severe illness cover can help you manage financially. If you are running a business, business insurance can help protect business continuity,” she says.

The purpose, she explains, is to ensure that even when life changes unexpectedly, people still have financial support that allows them to continue living with dignity, preserve their lifestyle, and protect the wealth they have built.

Another important reason for young adults to consider life cover early is affordability and accessibility. Mrara says taking out cover when you are younger can often mean lower premiums and fewer potential underwriting requirements.

“As you get older, premiums are generally likely to increase, and you may also be subject to more underwriting interventions to assess your health before cover is granted,” she says.

Starting early allows young adults to put protection in place while they are healthier and at the beginning of their wealth-building journey.

Mrara’s message is that life insurance should not only be viewed as a product for people who already have wealth, but as a tool that helps protect the ability to create wealth in the first place.