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Long-term
April 22, 2019

Protecting your clients during the 'adulting' stage of life

<strong>By: FMI</strong>

<h2>Lifestage 2</h2>

Whether it’s getting married, the birth of our first child, or even owning our first home, these milestones signal a key change in our lives, a growing maturity as we shift from one stage of life to another. An essential part of this is the weight of accountability that pushes us to think beyond ourselves and our immediate needs, and instead consider the future - not only for ourselves, but those reliant on us (emotionally and financially) too. <span class="Apple-converted-space"> </span>

For an adviser, these moments are critical opportunities through which to connect to your clients at a real moment of need. ‘Adulting’ as we’ve termed it, is the stage of life that reflects a mature behaviour often seen in relationship changes (getting married, having children) and big financial decisions (buying a house).

Whether sharing a home with just their spouse or a house full of kids, the biggest part of how we define the ‘Adulting’ life stage is preparing for those big financial responsibilities. Typically, clients like these have already started thinking about life insurance – either due to a sense of responsibility for their loved ones should they no longer be able to provide for them, or in a more engineered manner, say for example when life insurance is a prerequisite for a bond. Regardless of what need pushed an individual into the industry, the common misunderstanding here is the belief that life and disability lump sum cover – as traditionally sold – sufficiently protects them against life’s risks.<span class="Apple-converted-space"> </span>

This perception often means South Africans are uninsured for more common risks like temporary injury and illness. Protecting your income against the more prevalent risk of injury and illness is just as critical as insuring yourself against permanent disability and death. Unaware of income protection, many South Africans fail to realise that more often than not, sick leave is not necessarily going to carry them financially through any short-term setbacks.<span class="Apple-converted-space"> </span>

Financial advisers have an important role to play in recommending tailored solutions and assisting their clients in choosing flexible cover that fulfils their unique circumstances – now and in the future.

<h3>We’ve pinpointed 3 powerful tips to help advisers do exactly that below:</h3>

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<li><b></b><b>Calculate their future earning potential.</b></li>

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By using FMI’s <a href="https://www.fmi.co.za/mi">Future Income Calculator</a>, you can quickly and easily calculate an individual’s specific future earnings over their lifetime. And it will surprise them! Take a 38-year old earning R50 000 a month as an example. They will earn a staggering R54.5 million over their working lifetime<sup>1</sup>.<span class="Apple-converted-space"> </span>

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<li><b></b><b>Consider their risk reality.</b></li>

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Using the example above, your customer needs to protect their future earning potential of R54 million against 4 possible risk events - a temporary illness or injury; a permanent disability, a critical illness; or death. When we take a look at the probability of each of these risks, the solution becomes even more powerful.<span class="Apple-converted-space"> </span>

A 38-year old has an 89% chance of experiencing a temporary injury or illness that will stop them from working for more than 2 weeks during their working career. By comparison, they would have a 15% chance of a permanent disability, a 36% chance of a critical illness and only a 13% chance of death before the retirement age of 65.<sup>2</sup> <span class="Apple-converted-space"> </span>

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<li><b></b><b>Cover them against all risk events.</b></li>

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An individual in the ‘Adulting’ stage requires a combination of income and lump sum benefits across Disability, Critical Illness and Life, to ensure they’re covered regardless of what life may throw at them. Income benefits are ideally suited to meeting ongoing monthly expenses, while lump sum benefits provide for any once-off costs like settling large debts or estate duty. What’s more, by including temporary income protection, you are making sure your clients are covered for the most likely event of a short-term injury or illness.

Through this process you can ensure that your clients have the right cover for the right time in their lives -<span class="Apple-converted-space">  </span>giving them financial security throughout life’s adventures and detours. Most importantly, this’ll help to deepen your client relationships as you help them to appreciate the cover they have today, knowing their plans for tomorrow are taken care of.<span class="Apple-converted-space"> </span>

<sup>1</sup>FMI Future Income Calculator. 6% nominal growth, retirement age of 70

<sup>2</sup>FMI Risk Stats 2019. Risk stats calculated on probability for 38-year old before retirement age of 70.

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