Why is wealth protection so important?
In 2020 alone, Liberty paid out more than R6 billion in claims related to wealth protection. Of that R6 billion – R4,74 billion was paid in life protection claims, R755 million paid in income protection and R848 million paid in lifestyle protection (i.e., dread disease like cancer). For this reason, wealth protection is the foundation of any successful financial plan. Wealth protection is about safeguarding your assets to ensure that you or your family can maintain a certain standard of living in the event of any unfortunate circumstance.
The first step to protecting your family’s future is understanding what type of cover you need for them and yourself – which will depend on age, current circumstances, life stage, income streams and how reliant they are on these for living costs. At IWCP – the wealth protection pillar of our client wellness dashboard includes: life protection, income protection, critical illness cover, disability cover, policy protection and gap cover. These are all necessary factors to be aware of when drafting a financial plan.
“Most people comprehensively insure their vehicles or household content; but what about comprehensively covering their life and income?”
Let us look at each aspect individually.
In order to structure a comprehensive wealth protection plan – you should start with life protection. Life insurance is the biggest gift you can leave your loved ones.
– How much life insurance do you need?
A general suggestion is to ensure that your death benefit is equal to a multiple of your annual salary, depending on how old you are and how many dependents you have. Alternatively, consider what expenses your loved ones will have to deal with if you were to die unexpectedly. How much money will they need to cover the bond? Do you have outstanding credit card debt? Do your children need money to cover school fees or go to university?
In times of darkness any amount of light will help, and the same analogy applies to life insurance.
Your ability to earn an income can be considered your most valuable asset. According to Stats SA – the national disability prevalence is at 7,5%. That means with a population of 58,56 million people – there are 4,39 million South African’s living with disabilities.
Let us say, for example, you are young professional, earning R 25 000 per month with a 5% yearly increase and you continue working for the next 35 years – you will earn over R27 Million rand in that time? That is the “asset” you are insuring with income protection. Income protection is an important form of wealth protection – this type pays out if the insured person can no longer earn an income because they’re unable to work due to illness, injury or permanent disability. This type of cover is especially important if you have dependents who rely on your income for their living, or you are providing a home and lifestyle that you will want to continue.
Three of the top 5 claims that Liberty paid out for in 2020 were Cancer and Leukaemia (27%), Cardiac and Cardiovascular system complications (20%) and Strokes (6%). These percentages differ across gender categories – with cancer and leukaemia being the most prevalent critical illness for women (31% women vs 25% men). Whereas men were much more likely to suffer from a cardiac or cardiovascular issue (24% men vs 11% women). In most cases, these critical illnesses do not result in death however, they do place a massive financial burden on you and family. Having the appropriate cover in place will allow for you to focus on getting better rather than having to worry about the cost of treatment for your illness and the lifestyle costs that may follow. As mentioned earlier, why are we so adamant on insuring our cars and household contents comprehensively; but have a “what are the chances” view when it come to our life and income?
Allows individuals the peace of mind knowing that certain premiums will be paid even if they experience financial disruptions. Policy protection ensures the continuation of premium payments on certain policies in the event of the death, disability or retrenchment of the life assured. Upon the death of one spouse – the burden of paying the remaining policies falls to the surviving spouse and is where policy protection becomes valuable. If you were to become disabled, the costs associated with adapting to your new lifestyle could place strain on your finances and force you to miss premium payments. Retrenchment is another stressful and financially draining event and the last thing you need is to worry about paying policy premiums.
– Future Protector – The best kept secret in the industry!
We all may need additional cover in future and especially if you are young. The risk you run is that your health may deteriorate in the future as you could become diabetic, have high blood pressure, or develop cancer etc? If you have the future protector in place, you will be able to take up to R6 million cover – in the future – as if you were perfectly healthy by locking it in today.
Medical expense cover
100% of medical aid rates does not mean that your medical expense claims will be settled in full and sometimes nor does 200% – it is case specific. Doctors, specialist and anaesthetists often charge at rates of 200% – 500% above the medical aid rates for treatment and any shortfalls not covered by your medical will need to be financed by you. Medical expense cover (or Gap Cover) provides a safety net for those unexpected medical expenses that are not fully covered by your Medical Aid scheme. Gap cover is a complementary insurance policy to an individual’s medical aid scheme. It provides cover for expenses that occur when medical practitioners charge more than the medical aid rates for treatment. It is important to note that gap cover is not a medical aid scheme and it will not cover any treatment expenses that your medical aid scheme does not cover. In order to qualify for gap cover – you must be a member of a registered South African Medical aid scheme.
In conclusion, we encourage you to explore what your risk tolerance and budget is by speaking with one of our advisors today. To speak to an IWCP advisor please call 011 678 8904, email: firstname.lastname@example.org or visit www.iwcp.co.za for more information.