3 minute read
The importance of keeping cover in place
In 2019, the average duration of an income protection claim at FMI (a Division of Bidvest
Life Ltd) was 71 days. While many may believe this to be too brief for any permanent financial setback, when compared to the financial loss felt by all South Africans during the COVID-19 shutdown, it’s clear that the impact of being unable to earn an income for as little as two months is enormous. It shouldn’t take a pandemic to truly appreciate the value of having the right insurance policies in place.
Not surprisingly, in times of financial strain insurance policies are usually the first to be cut. Yet there couldn’t be a more important time to keep these lifelines in place. The heightened chance of falling ill in this current context only compounds the magnitude of risks South Africans face on a daily basis, which is all the more reason for customers to be vigilant about keeping their policy. As individuals start to return to work and resume their monthly earnings, yet another financial setback due to illness or injury would be felt all the more keenly after this economic downturn.
Of course, there are other options available to those who need it. Designed to relieve some of the financial strain our policyholders are experiencing, while still enabling them to preserve their policies, FMI’s grace period allows customers to keep their cover in place for up to 60 days after missing a premium payment. And our reinstatement option means they can reduce their cover and premiums on certain benefits while money is tight, and increase their cover back to the original amount on the next policy anniversary once they’re more financially comfortable – despite any potential health changes or if they’ve claimed.
Three ‘life’ lessons to hold onto right now:
The importance of income protection: A 30 year old male, for example, has a slim 15% chance of dying before the end of his working career. In contrast, he has a 91% likelihood of being unable to work for more than 14 days during his working years. Income protection is the insurance policy that provides for your lifestyle today, ensuring your financial comfort when times of injury and illness strike (1).
Income protection is not only for serious risk events: While some of our claims have been serious, longterm cases, the most common events are knee replacement surgery, heart attack, hernia repair, spinal fusion, hysterectomies and hip replacement.
It happens more often than you think: According to FMI’s 2019 Claims Stats, the biggest risk any individual will face throughout their working career, no matter their age, is a temporary injury or illness. In fact, a third of our policyholders claim on their income protection policies.
Life insurance doesn’t have to be the intangible drain that many customers come to resent. The nature of the risks we face on a daily basis mean that the majority of customers will almost certainly need to submit a claim and reap the benefits of a financial pay-out when an injury or illness occurs. With the right insurer, and a solid income protection policy, this could be a relationship that keeps on giving, especially in times of financial strain and uncertainty.
For advisers, in times like these the most important step is to communicate with your clients. It’s important to reach out to those who may be experiencing financial difficulties before they default on their policies. A lapse could make it more difficult for a client to qualify for the same cover again, especially if their health changes, and it might be more expensive if they are older. One way to ease the financial burden for clients who only have lump sum cover in place, is to consider switching to income benefits. Income benefits are typically more affordable than the lump sum equivalent and cover your clients not only for serious illnesses, permanent disability or death, but for temporary illness and injury as well.
(1) FMI Risk Reality calculator, 30 year old male, non-smoker