How much disability insurance is enough? The reality is, if you are disabled then your cover is probably not enough and if you are not, then your cover is probably too much. From the view point of the insurer, 100% cover has the potential to lead to overclaiming. However, from an insured's viewpoint you want as much cover as you can get. There is no point in being overinsured. Lump sums are more favoured as opposed to income disability because it is simpler and appears to be more attractive to have R2 million lump sum than a R10 000 a month benefit. Many clients do not know what their group schemes cover and there is a perception that lump sum disability is cheaper. This can be true, but the benefits are different. Benefits are available in three main areas - occupational based, impairment based or a combination. Own occupation addresses a situation where a person cannot perform their own occupation. This was available in lump sum and income benefits. Impairment based is assessed against medical criteria eg. use of limbs or the ability to perform daily living activities. Advantage of this is that there are tiered and non-tiered solutions that can pay for eg. 25% benefit. Needs on disability include income to be replaced, debt to be settled, possible lifestyle (house and car) modifications, and if there is a business partner cover for this area. What type of cover is suitable? For business assurance for contingent liabilities and to buy and sell a share of the business lump sum cover is appropriate and business overheads income cover is appropriate. For lifestyle changes lump sum is preferred. Critical illness will pay out on an event, and impairment pays out on the actual outcome of an event. How much can be afforded of each? To replace lost income, income benefit is preferred. One needs to look at what you are going to lose and include any benefits you may currently receive. Advantage with an income solution is that disability cover is available. Don't assume that this type of cover is included - it can only be for select individuals and/ or it may only be effective after a waiting period. Click on the attachment below to view the Liberty Challenge
An interesting attachment by the Reserve Bank on Exchange Control
Inheritance or a Real Pension
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