By Evelyn Doubell
When employees are asked what their most valuable asset is they typically list their house, car and other material possessions, forgetting that without an income they would not be able to afford these assets.
Your income is your most valuable asset which is why protecting it is so important. Most companies have benefit schemes for their staff members in place which includes an income replacement benefit. These benefits normally cover 75% of your pensionable salary which is your salary before perks such as company retirement fund, car, petrol allowance and so on, are added. This can be as low as 60% of your salary depending on the extra benefits your company provides. In most cases the waiting period is three months before the benefit will start paying out. But how many people have three months’ salary saved up to plug this gap should an unforeseen event or illness happen?
Some companies will take on the responsibility of assisting a staff member during the three months through loans or by raising funds for the ill or injured staff member. However, many companies can’t afford to carry on paying a staff member when they are unable to work given that they have to start paying somebody else to take the staff member’s place. It is therefore your duty to ensure that you are adequately covered as you are the one who will be financially burdened.
Many of the staff members I have presented to over the years have been interested in covering the three months’ waiting period as well as making up the difference between what the company’s scheme paid. Since they were not covering the full salary but the difference, the premiums tend to be very reasonable, working out to be similar to the cost of a take-away meal for two or a lipstick, depending on where you shop.
It is also possible to be over-insured for income replacement so the advice you get must ensure that your company benefits are considered. You certainly don’t want to pay for a benefit you will not be able to use.
Recently, a staff member contracted the Covid -19 virus and was booked off work for 14 days. Although she was not very ill she was still unable to work. Fortunately the staff member, who is a commission earner, had taken up the income replacement benefit with a 7 day waiting period. Her benefit was paid from day one and she earned the full 14 days’ income.
A number of life insurance companies offer the income replacement benefit with flexible income requirements. If you are a commission earner, you can now also benefit from the income replacement benefit.
Business owners can also cover their business overheads up to certain maximums. The waiting periods are flexible and your business overheads will be covered while you recover.
If the past year has taught us anything it is that none of us are immune from falling ill or injured. Our health is a valuable asset which needs to be protected. The ability to earn a living should never be taken for granted – which is why we need to protect it.
Evelyn Doubell is a Private Wealth Manager at NFB Wealth Management