Protect your family from financial ruin by closing your death and disability gap

2016-11-17 06:00

EVERY day in South Africa an average of 383 families will lose a loved one while an additional 127 people will suffer a permanent disability. Unfortunately, these tragedies will leave many of the affected households financially destitute given that the majority of South African earners are underinsured by 59%.

The 2016 Life and Disability Insurance Gap Study conducted on behalf of the Association for Savings and Investment South Africa (ASISA) by True South Actuaries and Consultants shows that the life and disability insurance gap had widened to an overwhelming R28.8 trillion by the end of 2015 from R24 trillion at the end of 2012.

The Study, conducted every three years, measures the difference between existing life and disability cover and the actual insurance needs of South African earners.

Peter Dempsey, deputy CEO of ASISA, says: “While many choose to believe that the unexpected could never happen to them or their families, the statistics prove otherwise. It is therefore vital that you protect the financial welfare of your loved ones through any of life’s ups and downs with adequate risk cover.”

He notes that the insurance shortfall for the average income earner widened to more than R900 000 for life cover and over R1.1 million for disability cover.

“This means that in addition to the emotional trauma they may be experiencing as a result of a death or disability, families would have to overcome this shortfall either by finding extra income or looking at ways to reduce expenses, such as selling a car, family home and sending children to more affordable schooling,” he warns.

He observes that while the Gap Study only considers the income needs of households following a tragedy, it is important to remember that where a breadwinner has suffered a disability, not only would their family suffer a loss of income, but also face additional medical and other unforeseen expenses.

He also notes that many consumers do not invest in adequate financial protection in the belief that insurers do not pay claims, which is one reason why the insurance gap continues to widen.

Last year, life assurers paid out R45.5 billion in life and disability claims, a claims ratio of 99 percent.

He also says that, where claims were not paid it was mostly because policyholders had not been honest when disclosing details about their health or lifestyles.

Young earners particularly at risk

The 2016 Life and Disability Insurance Gap Study reveals that the insurance gap is substantially wider among earners below the age of 40 years as compared to their older counterparts.

Earners below the age of 30 years face an average insurance shortfall of R1.2 million for life cover and R1.4 million for disability, while earners between the age of 30 and 39 years face an even higher average shortfall of R1.3 million for life cover and R1.6 million for disability.

The insurance gap narrows substantially for earners above the age of 40 years, with the average shortfall for earners between the age of 50 and 54 years at only R150 000 for life cover and R323 000 for disability.

“Younger earners and young families must be aware that they would need to rely on the income from their insurance for much longer following a tragedy than older earners drawing closer to retirement, making their insurance need much higher,” explains Dempsey.

He emphasises, however, that as younger earners are usually healthier and less likely to have developed a serious medical condition, their insurance premiums will generally be much lower than that of older earners. The next edition will cover the cost of closing the gap for death and disability cover.

This article, is an excerpt from ASISA (Association for Savings and Investment South Africa)

You could contact me on 083 399 3905, my office on 032-944 3051 or e-mail me on for an appointment or further information and any other financial advice.

I am a financial planner for the past 33 years (18 years with Old Mutual and 14 years at East Coast Financial Services as the Director).


The information is only intended to be of a general nature and should not be relied upon by any part without obtaining full details from a licenced financial service provider.


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