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"What if..." is one of the things that keeps us up at night. What if I lose my job? What if I/we join the crime statistics? What if things don't come right, and we end up losing the house?
That's what risk management is all about: giving you the tools to distinguish between real and unrealistic fears; and giving you mechanisms to manage them.
Insurance is not a product we relish buying. We rarely rub our hands with glee when we sign up for a life insurance policy. Where we can, we avoid the issue altogether, unconsciously adopting the belief that bad luck only happens to other people. But it can be a very costly decision to take the risk to save a few bucks. Have a look at these statistics.
- Your chances of having a car accident are 1 in 100
- Your chances of dying from a car accident are 1 in 18,500
- Your chances of dying from slipping in the bath or shower are 1 in 2,200
- 150 000 people are severely injured on the road each year
- On a daily basis, 45 people die and 410 are injured, with 25 people becoming paralysed.
- In 2009 there were 396 615 assault cases and 512 060 burglaries / robberies.
The chances of being affected by one of these in your lifetime are high, and just one of them can lead to severe wallet stress – there is only so much a medical scheme will cover. So even if you can’t afford the maximum cover right now, you should attempt to at least partially cover yourself against the potential risks.
Look the devil in the eye
Oliver Werneyer, an actuarial risk specialist at Liberty Life, says: “While we can’t be blamed for not wanting to think about the worst-case scenarios, it is irresponsible to not consider the consequences if we don’t make provision for these mishaps.
“It is very important to sit with a financial adviser to identify (or rank) the importance of your different insurances and to work out an emergency plan for you, i.e. what to do should things go bad.”
There are two types of risk insurance you should consider:
Disability cover
Your ability to earn an income is your biggest asset, and it needs to be protected. If you are disabled and unable to work for an extended period or permanently, you would need to have a way to replace that income, not only for yourself but for your family.
Disability income insurance is often overlooked, potentially putting everything else at risk. “Unfortunately death is not the worst that can happen to you,” points out Werneyer. “It would be worse should you suffer from a disability or dread disease because you will be living through it yourself and it also affects your family.”
There are various types of disability cover so it is important to speak to a financial adviser to provide you with a financial needs analysis. Many people think they can weather the storm of a temporary illness or injury, but the fact is, few can. Say for example, you are in a profession where you earn commission or professional fees, and you cannot work for four months. If your expenses amount to R15 000 per month, you will be down R60 000. Add this backlog to the expenses of the next month, and you will need R75 000 to catch up. This is a tall order in anyone’s book.
Dread disease cover
A serious disease or trauma, even if covered by a medical aid, can cost well in excess of your medical aid benefits. Unfortunately, modern lifestyles are contributing to more and more people contracting serious diseases, and improved diagnostics means we’re picking them up far more reliably. The startling statistics are that 1 in 4 people will suffer a heart attack, 1 in 3 people will be diagnosed with cancer, and the average age of onset for a dreaded disease is 41.
Cover for these risks is essential because many of the costs associated with these diseases are not covered by medical aids or hospital plans. For instance, should you need to alter your house setup to accommodate your new condition, the medical aid certainly won’t contribute to that.
Signing up for dread disease cover can provide enormous peace of mind and relieve the financial stress of such an event
(Iona Minton, Health24, July 2010)
