What financial consequences will you experience if infected with Covid-19 or any other temporary illness? If you are unable to work and lose all or part of your income as a result, income protection can cover you financially in these instances.
Income protection ensures that you continue to receive your tax-free monthly income if you lose all or part of your salary due to a temporary or permanent disability, rendering you unable to work. This could include chronic illnesses or ligament injuries, such as a serious back operation that requires an extended recovery period.
- If you are employed by a company: income protection covers financial expenses if cover provided by your employer is insufficient, or it can top up your salary during times when you are unable to work to cover additional expenses.
- If you are a business owner: this benefit can enable you to employ someone in your absence to continue running your business.
A temporary disability income benefit is categorised as a short-term benefit to insure your income for up to 24 months, as opposed to a long-term benefit that insures your income for when you are permanently unable to work.
Irrespective of whether you have sufficient sick leave, a temporary disability income benefit will pay out your claim, depending on which percentage of your net income you have insured. This product is designed to prevent individuals from having to use their savings to fund themselves when unable to work due to unforeseen circumstances.
Insuring your salary: You have the option to insure your entire salary or a percentage thereof. For example, if you only insure 50% of your net pay, you will only receive 50% of your salary for the period during which you are unable to work.
Do not overinsure: If your net salary is R24 000 and you have two separate income protection policies – one to insure R20 000 and one for R10 000 – you will still only receive R24 000. Your insurers will aggregate all your policies and ensure that you are not paid out more than your net salary, even though your premium was based on a higher amount.
Clarify your job description: In addition to insuring a salary amount, your income protection policy will insure you for a specific job and its responsibilities. For instance, if you are a Computer Programmer but the job title on your policy is stated as IT Consultant, your claim will not necessarily be paid out for being booked off due to a thumb injury, since an IT Consultant will likely still be able to perform his/her job without the use of a thumb. A Computer Programmer on the other hand, will not be able to use a keyboard to perform his/her job without the use of a thumb.
7 day waiting period policy: Only professional persons that have degrees, business owners, or contract workers/commission earners qualify for a policy with a waiting period of 7 days.
Group life cover: If you currently receive a group life cover benefit from the company you are working for, it is important to check the claims definition of the policy in terms of the waiting period, to be aware of what you are covered for. This will also tell you whether you require additional cover.