According to our claim statistics, 70% of people will have at least one illness or injury in their working lifetime that will prevent them from earning an income. And yet, South Africans have traditionally focussed on lump sum benefits when it comes to life insurance. One of the contributing factors to this trend may be that people simply do not understand their risks. Our research suggests that people are 2x more likely to have an injury or illness during their working career and 5x less likely to die before the age of 65, than they think1. This perception is evident by the fact that disability lump sum benefits are sold 3x as much as income benefits2, despite the fact that a temporary disability is the most likely risk at every stage of life3.
As a financial adviser, it’s vital to help your clients understand the impact of a temporary injury or illness. With 72.5% of household income going to servicing debt4, most South Africans struggle to make ends meet even when earning an income. Even a small interruption can have devastating consequences on their financial stability and ability to provide for not only themselves but for their families too.
But there is good news. Choosing to prioritise Income Protection has a few powerful advantages for you as the adviser and your clients. Most importantly, it offers trust. The client is able to trust in the reliability of the product they are choosing and recognise the adviser who guided their financial plan. And trust for the adviser, who can confidently put his or her reputation on the line, not only for the benefit mix but behind the insurer as well.
Let’s explore these advantages to you, the adviser:
Income benefits simplify the advice process because you do not need to make assumptions around the lump sum required to provide an entire future income.
Simpler policy servicing
Income benefits make servicing the policy simpler in the long term as all you need to do is update the policy with your clients’ latest salary amounts or monthly income to ensure they have the correct cover.
According to our 2017 Lapse Report, lump sum only benefits are 66% more likely to lapse in their first year, compared to income only benefits, highlighting the fact that individuals understand the indispensable value of an income benefit.
Income benefits mimic the income stream your clients are trying to replace, making them easier to understand and therefore easier to sell.
Tools to assist Record of Advice
We have introduced a number of tools to facilitate this important conversation with your clients and which can also be used as part of your Record of Advice.
- FMI’s Future Income Calculator calculates how much an individual will earn over their working lifetime. This helps advisers point out that income protection doesn’t just protect your monthly salary, it protects your future income.
- FMI’s Reality Check Quiz calculates the chances of a temporary injury or illness, a permanent disability, a critical illness or death at any stage of life, to ensure individuals get the cover they need..
How to shift to income first
Financial advisers have an important role to play in recommending tailored solutions and assisting clients in choosing flexible cover that fulfils their unique circumstances and supports both their current stage of life and their future selves.
There are key trigger points in any individual’s life relative to their life stage that pushes them into the insurance market. These include career (starting or switching jobs), relationship status (getting married, divorced, having children), and financial growth (buying a house or car). These become opportunities for advisers to flag the need for Income benefits across all of life’s risks.
Disability – Our Temporary and Extended Income Protection covers 100% of income. This allows you to reduce lump sum amounts by offering cover that gives your clients the option to convert up to a third of their Income benefit to a lump sum in the event of a permanent disability.
Critical illness – A Critical Illness Income benefit is far more cost effective compared to a lump sum, and addresses the impact of a critical illness more effectively. Our Critical Illness Income solution strengthens our Temporary Income Protection (TIP) benefit by paying 130% of the TIP benefit for up to 12 months, whether your client works or not. This benefit also converts to a lump sum at retirement age, ensuring your clients are covered throughout their lives.
Life – Life Income provides beneficiaries with estate liquidity while estate affairs are being concluded and can be used to give clients flexibility to tailor specific solutions to fulfil their individual circumstances.
Life is about the impact we make on the people around us. As an adviser, you make an impact by protecting your clients’ income. This ensures that they are free to keep impacting the lives of those they love and care for, no matter what life may throw at them. With cover that puts income replacement benefits first.
1FMI 2018 #RealityCheck Consumer Survey – 25 – 35 year olds.
2FMI 2017 Disability Cover Study
3FMI 2019 Risk Stats – chance of a temporary injury or illness that will last more than 2 weeks before retirement.
4The South African Savings Institute Dec 2017 SARB Quarterly Bulletin