FANews
FANews
RELATED CATEGORIES

The 4th D of life insurance

01 August 2007 Kenny Rabson, Discovery Life

How prepared are people to meet their financial needs in the case of an accident or illness that puts them off work for extended periods? Brokers must play a role in advising and educating clients about the importance of cover for the fourth D of life insurance – downtime.

While extended time off work may be less of an issue for those who are employed by companies that have the funds and are willing to tide their employees over while they recuperate after illness or injury. But it should be an issue for those who are self-employed, such as doctors, or those whose remuneration is tied to their activity, such as salespeople.

More likely than you think

These kinds of illnesses or accidents are a lot more commonplace than people realise. How often do we hear of someone who goes into hospital for a routine procedure, but through some complication or infection, ends up extending that stay for weeks or even months ?

Even successful procedures such as an appendectomy or a hernia operation can put a person out of commission for a few weeks, which could be disastrous for a self-employed person. A simple broken collarbone or slipped disc can be immensely debilitating for the individual sufferer and South Africa's high road accident and violent crime rates pose very real risks of serious injuries.

Medical cover

In all these situations, medical aid cover will generally meet the medical costs in the interim, but there is little or no compensation for the inevitable loss of income and the potentially crippling effects, in a financial sense, of servicing a bond or car repayments, plus other living expenses.Short-term illness or incapacitation is moreover eminently insurable through an income protection policy, yet few people who really need it take out this type of cover.

The 3 Ds

Typically people insure against the three Ds – unexpected death, dread disease or permanent disability. Many hope that their dread disease or permanent disability cover will protect them from a temporary loss of income - an erroneous notion since these forms of cover only cover conditions from which the person is not expected to fully recover. And fewer than 15% of policies sold are for income protection.

Why this discrepancy ? Perhaps people find the prospects of a life-threatening disease or permanent disability more harrowing. More likely is that income protection is expensive, and that too many people take an approach of "it won't happen to me".

Serious consequences

The reality usually only hits home when the person realises that his or her savings are not sufficient to meet everyday expenses while temporarily away from work, leading to drastic measures like entering into more debt or having to sell off assets just to make ends meet. Then there are the unquantifiable costs, such as a permanent loss of key business through not being able to complete a project or service a contract.

Income protection is perhaps the most critical form of insurance, yet it remains the most under-insured areas in the typical individual's portfolio. Perhaps it is time we recognised a fourth D - downtime - and gave it the attention it deserves.

Quick Polls

QUESTION

The South African authorities are hard at work to ensure the country is removed from the global Financial Action Task Force grey-list by February or June 2025. What do you think about their ongoing efforts?

ANSWER

But what about the BRICS?
Compliance burden remains, grey-list or not.
End-2025 exit is too optimistic.
Grey-list is the new normal.
Too little, too late.
fanews magazine
FAnews October 2024 Get the latest issue of FAnews

This month's headlines

The township economy: an overlooked insurance market
FSCA regulates crypto assets: a new era for investors
Building trust: one epic client experience at a time
Two-Pot System rollout underlines the value of financial advice
The future looks bright for construction
Subscribe now