When it comes to risk planning, many financial advisers follow the traditional route which focuses on insuring your clients most dire risks, such as death and permanent disability, at the expense of their most likely risks like an injury or illness. And whilst there is a need for individuals to make provision for their loved ones should they pass away, the risk and impact of a temporary injury or illness cannot be underestimated. In fact, according to life insurer FMI, a division of Bidvest Life Ltd, it’s the most likely risk a person will face during their career, at any age1. It’s understandable when you consider that 7 out of 10 South Africans will have at least one injury or illness during their working life that will prevent them from being able to earn an income2.
Many of your clients probably have a rainy-day savings account planned for temporary set-backs. And that may be sufficient to carry them financially on the odd occasion they need time off work, but is it enough the second or third time around? FMI says that after your clients’ first claim experience, their chances of needing to claim again increase three-fold.
Working professionals are often overlooked as potential clients because they are likely to have some type of existing cover in place through a Group Scheme. There is however, real value to be found in this scenario for the adviser: Group schemes typically have a waiting period of 3 months or more, yet almost 90% of the claims FMI paid in 2018 were for less than 90 days. Use this opportunity to connect with, as well as support more clients who, by trusting in the institutions in front of them, are dangerously exposed to life’s more prevalent risks. This means that 9 times out of 10, the average employee who believes themselves to be fully protected would not qualify for a claim. More than that, with only 36 days sick leave over a 3-year period, it’s very likely they could run out of sick leave.
They desperately need the expert opinion to ensure they are sufficiently protected in the second or third instance, when they need to take time off work and their sick leave has run out, or their claim falls short of the waiting period for which they qualify in their Group scheme.
There is the misperception that if you’re salaried, your sick leave and Group cover will take care of you during any time off work you may need to take, due to illness or injury. For any employee, coping with the prospect of unpaid leave would prove challenging to say the least. It’s likely this did have a detrimental effect on their long-term health should they feel compelled to return to work before they are ready.
Such a scenario is bad enough for salaried individuals but for business owners, any financial interruption could spell disaster – not only for their personal livelihood, but for staff and extended families who rely on that income as well.
“It is imperative that customers understand the products that are available to them and what their risks are,” says FMI CEO, Brad Toerien. “That’s why we’ve developed the FMI Reality Check Quiz – to help advisers show their clients what their reality is of experiencing a risk such as temporary illness or injury, a permanent disability, a critical illness and death.”
Toerien says that typically, most life insurers and advisers go straight to insuring their client’s against death and permanent disability by opting for Lump Sum benefits. That’s the conventional view and it’s dangerously misguided. The progressive approach is to first protect 100% of your clients’ hard-earned, monthly income against what’s most likely to happen, which are the risks of injury, illness, or being diagnosed with a critical illness. Only then should advisers opt for Lump Sum benefits to provide for additional once-off expenses: like bigger lifestyle costs that arise when living with an injury or illness, such as home renovations to accommodate a wheelchair.
“And that’s what we mean by Income First. Because if you want to protect your clients against all major risks, the best way to start is with a benefit that will pay an income. It’s this structure that makes FMI’s Income First philosophy is irreplaceable. Opt for the right mix of life insurance benefits that will shield your clients from having to dip into their rainy-day funds when unforeseen disruptions in income arise,” concludes Toerien.
1FMI 2019 Risk Stats
2FMI Claims Stats
3FMI 2018 Claims Stats