Many of us might wish for an indefinite extension to adolescence, but once you’re no longer carefree on your parents’ dime, it’s time to start making adult choices. And one of the most important financial decisions you’ll make is to protect yourself – in the short term and the long term.
Taking out risk cover when you’re young should be the cornerstone of your financial planning, because it’s when you’re most exposed and inexperienced. Statistically, you’re more likely to be involved in an accident between the ages of 19 and 29. Worse still: more than 40% of all deaths in the 15-to-29 age group result from unnatural causes.
According to the Automobile Association, about two-thirds of vehicles on South Africa’s roads are uninsured. If you’re one of the uninsured masses, crashing into another car can cripple you financially: it’s like playing Russian roulette with your life. If you’re injured and need treatment or long-term care, the costs can be ruinous, and your potential to earn an income dramatically arrested. And if you die, your family will be saddled with crippling debt.
Dr Maritha van der Walt, the convenor of the Association for Savings and Investment South Africa’s medical and underwriting standing committee, says long-term insurance is essential. “Young people have their whole lives ahead of them. Their needs are different too, so life cover with critical illness, disability and income protection is very important,” she says.
Millennials comprise the largest generation in history: they have different needs, expectations, a different way of doing business, and are much more connected than the older market.
Van der Walt says insurers are increasingly factoring in this market – not only because of its size, but also because technology allows more flexible product development. “Millennials’ needs and where they are at in life – having studied, probably with study debt, been on their parents’ payroll for a long time – are more than ever being considered.”
Van der Walt, a medical doctor who is also the chief medical officer at Discovery Health, says young people might feel invincible, but they need to understand that they get injured and fall sick. “Actuaries call it the ‘accident hump’: it’s a time in your life when you’re ready to take on the world, but you have less experience, and you’re more likely to get hurt.”
Discovery is ahead of the pack in terms of tailoring insurance for the youth market. Rather than loading premiums for risk, it’s using technology to monitor behaviour and reward responsible driving. Discovery’s Smart Life Plan, which was launched in September last year, targets the 18-to-26 market. The young adult benefit is exclusively available to drivers younger than 26 who are members of VitalityDrive and who have a DQ-Track tracking device installed in their vehicle.
The benefit rewards safe driving and penalises unsafe behaviour: for every kilometre you drive between 11pm and 4.30am, you’ll lose R10, so policyholders are encouraged to use the Gautrain, “DriveMe” partners such as Uber, Scooter Angels and Taxify.
“If you’re a good driver, you’re rewarded – especially when you know you are being tracked,” Van der Walt says. “A young driver might not necessarily cause the crash, but others on the road do. We make young people aware of the risks and reward them.”
Insurance shouldn’t be viewed as a dread purchase: it’s being responsible. Life cover policies are cheaper in your 20s, and are less likely to have exclusions or limitations.
Van der Walt says: “Once young people are no longer dependent on their parents, it’s important that they take out their own policies, rather than fall under their parents’ insurance. They need to learn to manage their own finances. It’s also good to pay your own insurance, so you get your rewards: your free smoothie, discounts at the fuel station, and so on.”
adulting (noun, informal): The practice of behaving in a way characteristic of a responsible adult, especially the accomplishment of mundane but necessary tasks