INVESTIGATING INCOME PROTECTION


Investing & Money
piece written on the 10th September 2015 by  

Over the past several weeks I’ve been working with Momentum to create awareness about critical illness cover and income protection. I’ve even written about the difference between them and this week I would like to cover income protection a little bit more because it’s something that I personally buy into.

I’ve been told that there are two primary reasons why people don’t protect their income, the first is that it’s too expensive and the second is that of a lack understanding. Momentum went on to explain to be that 80% of their clients do not insure 100% of their income through income protection benefits. What catches my attention is that as humans when all is going well we think it will always stay like that so why spend money getting protection? For those who do understand that it’s important to get protection and insure a portion of their income, have they ever thought about what it would be like to get a decrease in pay?

Take a scenario for example, imagine you earned R15,000 per month and you ensured 67% of that. If you were unable to work and wanted to claim you’d only get R10,000 per month. Imagine someone started paying you R5,000 less each month! You would most definitely jump around and make a plan, but why not jump around now and make a plan to avoid that? That’s the question I found myself asking – if you can prevent it, why not do it? Statistically speaking, and a bit of a downer, 1 in 4 of today’s 20 year olds will be disabled before they retire. It’s quite a sobering statistic, but would you really want to gamble?

I am by no means trying to sell this but I’m trying to look at it from a few different angles to emphasise the sheer importance of these sorts of cover. It’s impossible to predict the future but you can certainly protect yourself. We all want to invest our hard earned money into vehicles that will bring a return, I completely appreciate that but if we don’t protect ourselves that invested money will get used up very quickly if anything goes wrong.

Neil Müller, Head of Retail Life Insurance Product Development at Momentum ended off by saying the following:

“With so many other income protection solutions that Momentum has to offer, there simply does not exist an income protection need, at this time that we cannot protect. As salary earners or business owners, either self-employed or in a professional capacity, we should secure our earning capability and protect our hard-earned money. To protect one’s stream of income today means that you have mitigated risk that most likely would have had a negative effect on you and your family, going forward.”