The Association for Savings and Investments of South Africa (Asisa) has found that high-income earners, including graduate professionals, are severely underinsured when it comes to life and disability cover — ironic, as they’re meant to be the most financially astute South Africans.
According to Asisa, South Africans earning R16 700 or more are underinsured in the event of death by an average of R1,5-million, or 46%. In the case of disability, high-income earners are underinsured by over R3,2-million (or 60%), on average.
Although professionals with degrees are three times more likely to have a life policy and five times more likely to have a disability policy than people without degrees, they’re still heavily underinsured for these types of cover, by 28% and 55% respectively.
So what should professionals do?
Gerhard Joubert, head of group marketing and stakeholder relations at PPS Insurance, says that high-income earners can look at increasing their level of cover. They would need to increase their monthly life and disability premiums, as a percentage of their earnings, by 1,6% and 1,4% respectively (on average).
They can also reduce their monthly expenses on items like houses, transport and holidays. The bad news is to close the underinsurance gap on their life cover and disability, they’d need to reduce their expenses by 25% and 39% respectively.
Graduate professionals also fail to update their product provider when circumstances change — say, when their salaries increase. Salary inflation tends to be higher among lawyers, doctors and engineers in the early years of their careers, so the cover they have won’t be appropriate to their changing needs.
Joubert says many professionals fail to update their details. “Only around 70% of the income we would expect members to be earning is actually reflected on our books,” he says. “This means that the life cover that members have taken out would actually fall short of how much they need, based on their current earnings.”
Joubert says families of these individuals have a standard of living that would be impossible to maintain if something were to happen to the breadwinner. If you’re one of those breadwinners, you might want to make sure you have adequate life and disability cover in place.
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