It will never happen to me

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“It will never happen to me” is something we hear often from clients in the financial planning environment. But realistically, why would we be exempt from “it never happening to me?”

Too often we think of our major financial assets, such as homes, vehicles and investments, as being the real value in our lives. However, we tend to discount or overlook the value that we as individuals hold – our ability to earn an income. If anything were to happen to interrupt our income-earning capacity, the chances are that most of life’s pleasures, as we know them, will be put on hold. In fact, our ability to earn an income is actually our biggest and most valuable asset.

The interruption to our ability to earn an income could be by way of an accident or illness. Either way, it would have a devastating effect on our lives and that of our family if we could no longer bring our regular income into the household. Added to this, the length of time that we might be off work could also have a damaging effect on our lives and our financial wellbeing. This could also mean an interruption in our financial planning, such as having to put retirement savings on hold. If you have children at school, how will the school fees be paid? What about car repayments, and your home loan, not to mention your medical aid contribution?

According to 2015 claim statistics published by Liberty Life, almost R1.1 billion was paid out for critical illness and disability. To be exact, R678 million was paid in claims for critical illness and R407 million for disability claims. These statistics shows the reality of this happening and the possibility of it affecting you!

If you have group life cover with your employer, does the benefit include disability cover? If so, is it a lump sum benefit (permanent disability) or a monthly income? What are the waiting periods?  If you’re self-employed, do you have an income protector? Does it include a benefit to pay your overheads while you’re unable to work? This would ensure that your business stays operational and enables you to “buy time” to make decisions on what to do next.

Another reality we are faced with is the consequence of crime. Many people with no health issues at all are suddenly rendered disabled (temporary or permanent) as a result of a crime. Injuries and trauma resulting from a crime could result in one being forced to take time off work to recover. The result is that your ability to earn income is interrupted, often with devastating long-term effects.

The solution is that you make provision for this eventuality by ensuring you are taken care of if you are unable to work for any period of time, due to accident, injury or illness. Remember that there was a recent change in tax legislation meaning that you can no longer claim your disability insurance premiums as a tax deduction, but your insured income will be paid out tax-free.

Please call one of our financial advisors for further information on how to protect yourself against this possible eventuality.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted. (E&OE)

Greg Visser
Senior Financial Advisor
FPM Risk & Wealth Management
greg@fpm.co.za
011 778 9300

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