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Exit Strategy

ARTICLE BY

  • Kresantha Pillay
  • Chief Specialist for Risk Solutions
  • Liberty

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Why Retrenchment cover never gets old. After a brief hiatus, Liberty has now relaunched their retrenchment cover offerings in full with two offerings to meet different clients’ needs.

Retrenchment cover has long been a popular product for advisers and their clients. The uncertainty of the modern workplace means that being insured against losing your job is never a bad idea. A person’s salary is usually their greatest asset, it allows them to pay off big monthly expenses like home loans and car loans. And just put food on the table.

A real sign of how important retrenchment cover is emerged during the Covid-19 pandemic.

During this time retrenchment claims at Liberty peaked between August and October 2020 on the back of a lag effect from the start of lockdown.

During these three months, claims increased to over 60 per month, compared to the just over 10 per month during January and February in the same year, showing the effects of the economic contraction at the start of the pandemic.

The company took the decision to temporarily withdraw most of its retrenchment cover in April 2020 and offer the benefit in a reduced form, so as to be able to fully meet its obligations to existing clients. As of 2024 this has changed, and Liberty has now relaunched their retrenchment cover offerings in full.

Retrenchment cover in an evolving world

We are now certainly living in more optimistic economic times where the government is actively trying to build capacity into the economy in terms of power supply and transport infrastructure. This hopefully will start adding more jobs into the economy, which is good news for everyone. But this does not mean retrenchment cover is not relevant.

We live in an increasingly fast paced world where key skills and what can seem like rock-solid employment prospects can be shifted in months. It seems contradictory that the technology that drives economic growth at the same time can create job losses because it changes so fast. Businesses that thrive these days are the ones that adapt to change the best and this often means acquiring new skills while letting older skills go at the same time.

It could be new chemical formulas, more efficient engineering equipment, software and working techniques that make this happen.

Also, company management now needs to adapt quickly to new projects and ways of doing things. No one is immune from the ongoing changes. This is why retrenchment cover has remained a reliable solution for every adviser to offer to their clients.

How retrenchment cover works

The relaunched cover comes in two different offerings which responds to repeated calls from advisers and clients to reintroduce the offering in full, to meet the needs of the current environment. One package offers a 12-month payout while the other gives a six-month payout. Both provide the claimant with protection against a Section 189 employment termination.

The cover requires two years of permanent employment before any claim, as well as some months before Section 189 comes into force. It offers an overall maximum of 75% of after-tax monthly income or R30 000 monthly cash payout.

The 12-month cover, which is NCA compliant, cannot be taken on its own and requires life cover, impairment and income protector benefits to be in place and can only be taken along with Liberty’s Loan Protection Package. However, the six-month cover option requires only life cover or income protector benefits to be in place.

We’re living in fast-paced economic times, and this cover is designed to protect the working individual from the unexpected prospect of retrenchment that could temporarily have a real, material effect on their wealth, until such time that they find themselves in employment once again. It is interlinked as a holistic solution to protect against potential financial upsets that can have a real impact on a person’s long-term outlook and should be offered in the broader context of comprehensive income protection.

Technology and working contracts may change, but having cover like this in place means that a degree of certainty can be offered by advisers who understand that their client’s lives’ never stand still.

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