South African consumers are generally familiar with the importance of insurance. More consumers are getting car, home and medical insurance. One type of insurance that is widely misunderstood is disability insurance.
While most South Africans have some form of insurance, in the form of life, car or home insurance, a study by The South Africa Disability Market in 2013 found that 30% of insurance sold was for disability cover.
Studies have found that South Africans are under-insured for disability in general.
When can an individual claim for disability insurance?
An insured individual can claim if they become disabled through bodily injury or illness, to the extent that he/she is continuously unable to fulfil a substantial part of the duties of regular occupation he/she engaged in immediately before the disability.
Disability insurance in South Africa is usually offered in two ways:
Studies have shown that in South Africa, the focus is more on permanent disability cover and lump sum disability cover is being oversold. Few people consider temporary disability cover. While this isn’t necessarily a bad thing, statistically, you are more likely to face a temporary disability than a permanent disability.
Income Protection is equally as important. This type of cover pays the individual a fixed monthly income while they’re unable to work due to a disability illness or accident. Most people fail to take income protection into account when they consider disability insurance. The reality is that while a lump sum may be ideal, this type of payment also places major inflation, interest and longevity risk on the disabled individual.
The insured should get the monthly income from his/her regular occupation, averaged over the 12 months before the claim event took place.
Temporary disability provides income from the date of disability until the benefits of the permanent disability kicks in.