Should you have disability insurance cover?

2017-08-31 06:00

THE answer is clear: if you earn an income, or are going to be an income earner, then you should have some form of disability cover.

Your ability to earn an income is your most valuable asset, and is likely to be the driving force behind the accumulation of any other assets over your working life. It is imperative that you provide cover in the event that this earning ability is impaired. How much disability cover you need is dependent on your age, personal requirements and current financial affairs.

If this ability is curtailed, either through disability or through impairment, you may need to ensure that you have cover to meet your financial requirements. This does not only apply if you have dependents. It is as important if you have no dependents, as this enables you to remain financially independent of others, thereby maintaining your dignity.

It is necessary to distinguish between impairment and disability.

· Impairment implies a physical or functional disorder, but does not stop us earning an income. Your ability to earn may be impaired, but not completely stopped. Examples of impairment may be the loss of a limb or the loss of eyesight.

· Disability, on the other hand, implies an inability to earn an income from your employment.

The modern disability insurance cover often incorporates both disability and impairment cover. If you are impaired, you would receive a percentage of the insured amount.

This information is included in the details of the policy, and outlines the percentage payable per impairment and usually increases with the severity of the impairment.

There are three forms of disability insurance cover, namely Own Occupation Disability, Occupational Disability or Total Disability.

· Own Occupation Disability, you are covered if you are unable to perform your current nominated occupation. To illustrate by means of example, if you were a heart surgeon, and you lost a hand, with Own Occupation Disability you would be fully covered and paid out, as you can no longer operate.

· Occupational Disability, you would be covered if you were unable to perform your nominated occupation, or a similar occupation.

Under Occupational Disability, you would not be paid out, because you could become a General Practitioner. Own Occupation Disability is therefore a better option, especially for professionals in a specialised field, but this does come at an additional cost.

· Total Disability, you would only be covered if you were unable to work at all.

Two forms of disability income benefit - monthly (income protection)

Income protection may comprise either a permanent or a temporary benefit.

· Permanent income protection, benefit payments will usually continue from date of disability until age 65. The level of cover is usually limited to 75% of your latest taxable income. The 75% applies in aggregate, meaning multiple policies may not, in total, exceed 100% of your present income.

· Temporary income protection, benefit payments do not normally exceed two years. The level of cover may not exceed your latest taxable income. This too applies in aggregate.

Income protection premiums vary between products, both within a particular assurer and across different assurers. These products need to be tailored to your personal requirements.

Over 2.8 million people in South Africa live with disability according to Stats SA.

This article is an excerpt from Financial Planning South Africa.

You could contact me on 083 399 3905, my office on 032-944 3051/ 073 873 6927 or e-mail me on for an appointment to discuss the above or further advice on any other financial matter.


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 licensed financial service provider.


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