When it comes to risk planning, individuals follow the traditional route which focuses on insuring your most dire risks, such as death and permanent disability, at the expense of your most likely risks like an injury or illness. And whilst there is a need to make provision for your loved ones should you pass away, the risk and impact of a temporary injury or illness cannot be underestimated. In fact, according to FMI’s risk stats, it’s the most likely risk a person will face during their career, at any age1. It’s understandable when you consider that 7 out of 10 South Africans will have at least one injury or illness during their working life that will prevent them from being able to earn an income2.
Some South Africans may have a rainy-day savings account planned for temporary set-backs. And that may be sufficient to carry them financially on the odd occasion they need time off work, but is it enough the second or third time around? FMI says that after your first claim experience, your chances of needing to claim again increases three-fold.
For any employee, coping with the prospect of unpaid leave would prove challenging to say the least. It’s likely this’d have a detrimental effect on their long-term health should they feel compelled to return to work before they are ready.
Such a scenario is bad enough for salaried individuals but for business owners, any financial interruption could spell disaster – not only for their personal livelihood, but for staff and extended families who rely on that income a well.
“It is imperative that customers understand the products that are available to them and what their risks are,” says FMI CEO, Brad Toerien. “That’s why we’ve developed the FMI Reality Check Quiz – to show individuals what their reality is of experiencing a risk such as temporary illness or injury, a permanent disability, a critical illness and death.”
Toerien says that typically, most life insurers and advisers go straight to insuring their client’s against death and permanent disability by opting for Lump Sum benefits. That’s the conventional view and it’s dangerously misguided. The progressive approach is to first protect 100% of your hard-earned, monthly income against what’s most likely to happen, which are the risks of injury, illness, or being diagnosed with a critical illness. Only then should you opt for Lump Sum benefits to provide for additional once-off expenses: like bigger lifestyle costs that arise when living with an injury or illness, such as home renovations to accommodate a wheelchair.
“And that's what we mean by Income First. Because if you want to protect yourself against all major risks, the best way to start is with a benefit that will pay an income. It’s this structure that makes FMI’s Income First philosophy irreplaceable. Opt for the right mix of life insurance benefits that will shield you from having to dip into your rainy-day fund when unforeseen disruptions in income arises,” concludes Toerien.
1FMI 2019 Risk Stats
2FMI Claims Stats
3FMI 2018 Claims Stats