Salary Protection – Ensuring a Steady Income all your Working Life
April 30, 2018
Having a job and receiving a salary is a joy and a privilege in South Africa. But what if you were to lose your job? This is precisely why income- or salary protection is so important.
The ability to earn an income in South Africa is a gift and a valuable asset. So it makes sense to be prepared for the unexpected. Salary protection insurance will give you that peace of mind that when you’re out of job. You’ll have money still coming in to provide for your dependents.
Also, if you are young, you may think that this is one kind of cover you don’t need. But in South Africa, an accident or injury because of crime is happening to people of all ages. It’s one thing not having dependents. But when you’ve got small children, you need to ensure that there is always money coming in.
A Steady Income into the Future – Salary Protection
Many South Africans insure themselves against disability with policies that pay out a lump sum. That is because they are cheaper. South Africa has many excellent salary protection providers. And by looking at them and comparing, you can choose exactly what suits you. These kinds of policies do tend to be a little bit more expensive.
Get Advice on what’s Best
You’ve got to do research and understand precisely what Salary Protection is and make sure that you do actually have it. The reason for this is that many policyholders have lump sum disability cover but not income protection. Financial advisers have a duty to advise people that income protection products provide better cover than lump sum products.
Don’t wait till you’re older, take out salary protection when you start working. Lump-sum disability cover is good for some expenses, but income protection provides for your future living expenses, paying out a monthly income.
Having said that, everyone could do with proper financial planning advice on your financial obligations surrounding disability, but also dread disease and death.
A good reason to have salary protection as opposed to a lump sum disability policy is that the lump sum provides cover for permanent disabilities only, whereas with a salary protection policy you can get cover for temporary disability as well.
Temporary disability can result in huge income loss, more so when you’re self-employed.
Make Sure Your Salary Cover Policy Escalates – Salary Protection
So as to benefit from the protection of income cover, make sure your policy allows your monthly salary to escalate each year. Check out all the terms and conditions. Because there may well be a part there that actually requires you to request an annual escalation for your income protection benefit.
Yes, some providers such as Old Mutual do automatically increase this, but it’s not the case with all salary protection providers. Sanlam offers a salary protection benefit that remains the same but also one that escalates before and after a claim.
Other than that, check waiting periods. Salary Protection certainly gives you the certainty that there will be income for you when you aren’t working. You just have to know what you’re getting.
A trusted financial adviser can advise you on the good, the bad and the best of what insurance will suit your unique circumstances.
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All info was correct at time of publishing