Working South Africans are drastically underinsured for death and disability – to the tune of trillions of rand, according to ASISA’s recent South Africa Insurance Gap Report. ‘This dramatic cover deficit has long-term implications for individuals and the country at large,’ says Petrie Marx, Product Actuary at SPF. ‘Part of the problem is that people don’t always understand the reasons why they require adequate risk protection. When people understand their risk cover needs, insurance is much less of a grudge purchase. ‘Many young people also find it daunting to decide what kind of cover is important, or are inclined to ignore the issue – especially on an entry-level salary.’ There’s no universal answer or onesize-fits-all approach, as each individual’s circumstances are unique, he says. ‘We’d advise you to do a full needs analysis to determine what cover best suits you – either with a financial adviser or through a roboadvice tool like Sanlam Now.’ However, if you want a general idea of the types of insurance you may need at various life stages, Petrie has advice regarding your main risks and cover needs.
Student
- Risk: Your family would be responsible for your student loan debt should you pass away. Solution: Death cover.
- Risk: Serious injury. Globally, road accidents kill someone every 24 seconds, and are the leading killer of young people aged five to 29, according to the World Health Organization. Another report from the International Transport Forum says those from 18 to 24 are twice as likely to be involved in a singlevehicle crash than individuals aged 25 to 49. Solution: Accident cover.
Young, single professional starting out
- Risk: Your family would be burdened with your debt should you pass away, for example, your student loan or vehicle payments. Solution: Death cover.
- Risk: Losing your ability to earn an income. You have 40-plus earning years ahead of you. What would happen if you suddenly became disabled? Solutions: Income protection and disability cover.
- Risk: Having to pay more for insurance later in life. Solution: Put additional life insurance in place now, as it’s most affordable when you’re young and healthy.
Ready to buy a first home with a partner
- Risk: Apart from needing the same type of cover as other young adults, you also need to protect yourself and your partner from co-signed or short-term debt, such as credit cards and personal loans. Solutions: Credit life insurance and some additional death cover.
Young family or considering having children
- Risk: If your family’s lifestyle depends on two income streams, you’d lose that income should your partner pass away. This could also burden the family with debt. Solutions: Death cover, sufficient income protection and disability cover. Death cover is the best way to ensure your young children are provided for, particularly in terms of their education.
Peak professional years
- Risk: Illness, such as cancer and heart disease. Solution: Severe illness cover.
- Risk: Loved ones having to sell the assets for which you’ve worked because they need to pay for final expenses and settle estate costs, if you were to die. Solution: Death cover.
- Risk: Your life insurance needs may change as your children become more financially independent and you start to pay off your mortgage. Also ensure you still have sufficient income protection and disability cover. Tip: Consult your financial adviser.
Retirement years
- Risk: Although you might have paid off most of your debts, you still need to protect your family from any outstanding debt. Remember also that winding up an estate is likely to be expensive. Solution: Death cover.
- Risk: Your family having to pay for your funeral. Solution: Funeral cover.
- Risk: Your spouse losing a substantial portion of your pension should you pass away. Solution: Death cover, since life insurance can replace such a loss of income, ensuring the surviving partner can maintain their current lifestyle.
- Risk: Serious, life-changing events, such as cancer or Alzheimer’s, which may require long-term care. Solution: Severe illness cover.