Covid-19: What you need to know to protect your income

(AP Photo/Jens Meyer)

(AP Photo/Jens Meyer)

Published Apr 20, 2020

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If I get Covid-19, will my income protection or life insurance cover me? And what can I do if I can’t pay my premiums as a result of the pandemic affecting my income? These questions are top of mind right now as the lockdown affects millions of South Africans.

“The value of life insurance and income protection is only truly realised when crisis strikes – but it’s vital that you understand what you’re covered for, and how to claim if you’re affected by the pandemic,” says Leza Wells, chief product actuary of life insurer FMI (a division of Bidvest Life).

The common questions being asked include:

I’m in lockdown, but don’t have Covid-19. Can I claim on my income protection policy?

Income protection insurance is designed to help you if you develop an illness, or become injured or permanently disabled. If you can’t work because of the national lockdown, this isn’t a claimable event.  If you are a small business owner or self-employed, you may be able to apply for financial assistance from your bank or the government.

FMI’s income protection pays up to 100% of your after-tax income if you’re unable to work due to an illness or injury. As a policyholder, you must be unable to work for a specific period (the waiting period) before your claim is considered a valid claim. A waiting period of 7 days, 14 days or 30 days is most purchased by individuals.

Surely insurers can help in this situation?

Insurance companies calculate their income protection policy premiums based on the number of expected claims due to injury and illness. This is an entirely different set of risks to loss of income due to business interruption. If insurers were to pay everyone who was losing income due to the lockdown, but wasn’t ill, they would not be able to pay valid claims from existing policyholders, like for a cancer, death or disability claim.

“At FMI, we’re doing everything we can to support our policyholders at this time. We’re extremely empathetic when it comes to assessing Covid-19-related claims, and weigh each claim on a case-by-case basis. Our claims team builds long-term relationships with our customers, and it’s incredibly stressful to not be able to help everyone in this current situation,” says Wells. “The reality is that we have a responsibility to our other policyholders, and the broader industry.”

To help policyholders get through the lockdown period, FMI is offering all policyholders free mental health support in partnership with Global Choices. Policyholders can access The Talking Point’s national network of qualified professionals and counsellors through their 24-hour emergency call centre (0861 887 887) to deal with issues relating to anxiety associated with Covid-19, financial stress and how to stay physically and mentally healthy during this time.

I’ve contracted Covid-19, and I’ll be unable to work. Can I claim?

It all depends on the waiting period specified in your policy. Under a 7-day waiting period, you would qualify for a pay-out if you were displaying Covid-related symptoms as diagnosed by a qualified medical doctor and booked off as a result. This would be paid under the "minor infections" definition on short waiting period income protection.

If you have a 14- or 30-day waiting period, then you would be able to claim on your income protection policy if there are complications related to Covid-19 keeping you off work beyond that time and this is supported by a medical doctor.

I’m battling to pay my premiums as a result of the lockdown. What are my options?

Everyone’s worried about their finances right now. The important thing is not to let your insurance cover lapse, says Wells. This is the time that you need it the most. You should talk to your adviser about your options. To support and help carry you through these uncertain times, FMI has a variety of options available to their policyholders:

Grace period. You can keep your cover in place for up to 60 days after missing a premium payment. You can still claim during this time, but your premium must be up to date before a claim can be processed.

- Reinstatement option.

You can reduce your cover and premiums on certain benefits, and the cover can be increased back to the original amount on the next policy anniversary.

- Freeze benefit.

You can freeze your policy for 3 or 6 months. You won’t be able to claim during this period, but your cover and premiums will be automatically reinstated at the end of the term.

- Sabbatical.

You can keep your temporary and extended income protector and disability lump sum cover in place for up to a year if you aren’t working, with certain conditions. Your cover will be fully reinstated once you return to work.

The Association for Savings and Investment South Africa (ASISA) says that policyholders should do their level best to hold on to the risk cover that they have in place.

“Policyholders who are experiencing financial difficulties and who might not be able to afford their premiums should contact their financial adviser or insurer with urgency to discuss potential solutions. In the same vein, given the turmoil on the financial markets, now is probably not a good time to cash in your savings policy. Rather speak to your financial adviser,” says Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee.

PERSONAL FINANCE

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