Disability: What Happens if I Can't Work?

7 March 2019

You can't predict the future, but you can plan for it. We speak to Petrie Marx, Product Actuary for Sanlam Individual Life, about the importance of having disability insurance in place.

1. Is disability cover an essential expense, especially when finances are tight?

Unfortunately, people often misunderstand disability insurance and don't give it the priority in the budget that it deserves. When finances are tight, disability cover can be viewed as a grudge purchase; but it actually protects your greatest asset, which is your ability to earn an income and provide for yourself and your family.

Unlike pure life cover which provides for your loved ones after you're gone, disability insurance is there to provide for both you and your family should an accident, illness or injury prevent you from earning an income. You may also have additional financial needs associated with a medical impairment.

For these reasons, disability insurance is an essential form of protection alongside pure life cover. hands.

2. What can I use disability cover for, beyond covering a loss of income?

In addition to protecting your inability to earn, disability insurance could be used to cover your outstanding debts in order to reduce your overall financial burden. It could also fund any adjustments to your home or car that may be necessary in the event of you becoming disabled; or the costs of travelling to another city for expert medical care.

3. What happens if I own a business and I'm unable to run it due to an illness or disability?

Disability insurance can provide very good protection here, ensuring continuity in the business while you recover or adjust your business model. You could use your disability protection to appoint someone to manage the business on your behalf, or you could settle debts to reduce business expenses while you're unable to contribute to turnover.

If you're in a business partnership, it's common for both partners to have life and disability insurance in place, which can be used to buy out the respective shares in that business – at fair value – if one partner is permanently unable to work.

4. What's the difference between disability income and a disability lump sum? Do I need both?

Ideally, your disability insurance should include both lump sum disability benefits and income protection benefits (often called disability income).

You do not have to be permanently unable to work before claiming for this benefit.

Disability income pays out monthly on an ongoing basis, to cover everyday expenses like your bond, school fees, groceries and so forth. This benefit is easy to quantify and plan for, because it's based on your monthly income. You can opt to make this income keep track with inflation, which is an important consideration over the long-term.

A disability lump sum, on the other hand, is a one-off pay-out, which needs to be prudently managed. While it does provide you with more flexibility to settle debts or cover other unforeseen expenses, the lump-sum benefit does not pay out for interim periods when you are temporarily unable to work and will in all likelihood recover.

It's therefore worthwhile speaking to a financial adviser who can help you to combine these disability benefits in the most suitable manner. This way, you can be confident that you have disability insurance in place that will keep your family financially secure.