Cover for a vital asset

Anne-Marie Gous, business development manager at Glacier by Sanlam, said income protection can provide cover in the event of temporary or permanent loss of income so that your plans don't have to be thrown into disarray should an injury or illness threaten your regular occupation.

"It's important to insure your income-earning ability, particularly if you are self-employed. Benefits are paid monthly in arrears. This differs from lump-sum disability cover, which only pays out on permanent disability," she said.

Income protection can be reviewed to make sure the benefits keep pace with increases in your income. Payments are guaranteed to the retirement age you select and you can link payments to inflation.

With lump-sum benefits, the responsibility lies with you to ensure that the payout is invested optimally and that the money lasts for life.

Gous said the premiums you pay towards an income- replacement product are tax-deductible, but you will then be taxed if the benefit pays out, as though it were a salary.

With the lump-sum disability product your premiums will not be tax-deductible, but when the lump-sum benefit pays out it will not be taxed.

The level of salary covered by Sanlam - this may differ between providers - is up to 75% of your regular salary in the event of a permanent disability preventing you from working, while up to 100% of your salary will be covered in the event of a temporary loss of income. Premiums depend on occupation, gender and whether you smoke. The minimum monthly premium is R100 in Sanlam's case.

Premiums for all this cover can be kept down by electing for a longer waiting period before you want the benefits to begin being paid - it could be seven days or up to a whole year.

"Research shows that most disabilities are of a temporary nature, so individuals need to be certain that they can cover their monthly expenses during the selected waiting period, especially in instances where they have opted for a longer waiting period," said Gous.

When injury or illness strikes and the benefits kick in, payment of premiums is waived. "Once the insured returns to work, the monthly premium becomes payable again. Depending on the chosen benefit, the cover will continue until the chosen cease age or, in the case of temporary disability income, provision is made for 24 income payments for a specific cause," Gous said.

Source: Sunday Times via I-NET Bridge