Practically every adviser out there has seen the scenario: a client dies, or is unable to continue working due to injury, illness or disability. They, or their families, get a lump-sum payout – which quickly gets depleted, leaving the family unable to meet their monthly obligations.
Budget-friendly payouts
This is just one of the reasons why we’ve got to change the way life insurance is thought about and sold in South Africa. In a country where every working individual supports themselves, plus, on average, three dependents, we’ve got to be doing more to shift the focus from traditional lump-sum payouts to a more efficient structure that pays out as a monthly income.
The Covid-19 pandemic was a tough reminder for South Africans that they cannot afford not to budget for the risk of losing their monthly income. Consequently, there’s been a tangible shift among South Africans who recognise the importance of protecting their hard-earned income – evident in our policy uptake. In 2020, 44% of Bidvest Life’s policies sold were for income protection. A year later that had risen to 47%.
The fact is that income benefits solve for what really matters: protecting your clients, their businesses and their families against unexpected expenses incurred due to illness, injury, disability or death. They are also much easier to understand and plan for, because they mimic the income stream your client is trying to replace.
Guessing game
The challenge with lump-sum payouts is that it’s difficult to know how much cover your clients need when they take out a policy, and there are clear investment, longevity and inflationary risks. While lump sums are great to settle debts or once-off expenses, they aren’t as well suited to providing your clients with what they actually need – a replacement for their monthly income stream.
This is where the opportunity lies for financial advisers. Income protection is an easy sell for new clients who understand the financial impact even a minor injury or illness can have in the event that their income stream is disrupted. While simpler to understand and typically more affordable, income protection is also more effective – your clients are much more likely to claim for income protection than any other benefit. Bidvest Life saw the highest number of claims in our history in 2021, with claim volumes increasing by 44% over 2020 – and 92% of claims paid were for income protection benefits.
We firmly believe that income protection should be the first step in any financial plan but not enough consumers are aware that such a product even exists. Financial advisers have a key role to play in ensuring their clients know their real needs and risks and are covered correctly. More South Africans need to hear the message that by prioritising income protection benefits, they are protected from life’s curveballs and have claim certainty.
Millions of South Africans would look at life insurance differently if they knew what it could do for them. Right now, we can be relevant and show up for our clients like never before. It’s an opportunity we can’t afford to miss. Our future – and theirs – depends on it.
