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Would your family cope with the loss of their breadwinner?
This is an extract taken from the Star Newspaper November 20th 2010, written by Bruce Cameron: Life assurance gap is much bigger than previously realized.
Statistics indicate that around 160 000 income earners will die in 2011, and around 52 000 will become incapacitated through being disabled, according to surveys done by The Association for Savings and Investments SA, therefore placing their families in a precarious position where their breadwinner will be unable to provide for them. Most South African families are completely underinsured should this happen, resulting in no life policies.
If you died today, it is unlikely that your dependants would be able to maintain their current standard of living. And you and your dependants could be even worse off financially if you were suddenly and unexpectedly unable to carry on working.
Being forced into this unpleasant situation, where at least a third of the family income is reduced, is a massive problem for most ordinary South African families, should the breadwinner become disabled or die.
Don’t for one moment think that if you have a life policy, combined with your retirement fund, that you will have sufficient cover when this situation arises.
South Africans are usually divided into three groups when it comes to life policies (this is according to Mark Lapedus of Alexander Forbes):
- These are employed people with company –provided cover, employed people without company-provided cover, and then there are the employed.
Even those fortunate enough to be employed and provided with some sort of life policy and disability cover, there will always be some sort of shortfall, so best to be prepared and ensure that you have cover over and above this to provide for any eventuality occurring.
We become confident when we have cover with the company we work for, but this is naive, to say the very least, should a tragedy happen. Most employer schemes only provide fifty to sixty percent of the employee’s total annual salary in the event of a disability, and only two to five years in the event of a death of an employee.
Company schemes usually cover only the bare minimum.
Remember – it’s a mistake to rely fully on your group life cover.