Are you financially secure if you become disabled?

When disability strikes it may not be in a form you’d expect or can foresee. Angelique Ruzicka looks at the likelihood of falling into financial difficulty from being unable to work as a result of a disability and asks what people can do to ensure they are adequately covered in the event of sudden illness or depression.

You never know when a disability could strike and turn your world upside down. For writer, strategist and runner, Lisa James* it wasn’t an accident or a terminal illness that put a halt on her personal, professional and financial life.  Instead it was a stress-induced diagnosis of benign multiple sclerosis, a chronic condition in which the immune system attacks the central nervous system that stopped her in her tracks.

James, a busy mom of two, was one of the few people that was covered by disability insurance, but this still wasn’t enough. “My doctor booked me off for six months to recover and, while the diagnosis devastated me I had an income protection policy to cover me during that time which cushioned the blow initially.  However, my physical and mental recovery was slower than expected, six months turned into two years and totally wiped out my nest egg in the process.”

Statistics show that the average middle-income South African has around R900, 000 in income protection. While this may sound like a sizeable sum to some the Association for Savings & Investment South Africa (ASISA), which recently conducted a study into the impact of disability on financial security, found that at least R2 million insurance cover would be necessary to ensure the same standard of living could be maintained if the policyholder became disabled and unable to work.

With the shortfall typically exceeding R1 million many South Africans face having to maintain their increasing monthly commitments or drastically cutting their living expenses to make ends meet in the event of a disability.

The reality – according to The South African insurance gap 2016 research report conducted by True South Actuaries & Consultants on ASISA’s behalf – is that South Africans are underinsured for permanent and temporary disability by as much as 59%. This means that any disability could render them into large amounts of debt, particularly if recovery is slow.

Why are South Africans underinsured for disability cover?

There are many reasons why disability products are less popular than other kinds of insurance.  According to Hollard Life’s head of product & technical, Ryan Chegwidden, the main one is that it’s regarded as a fringe risk. For most people it makes sense to get life cover which takes care of their family if they die. Few believe or imagine that they could live but be disabled and a financial burden.

“So, when it comes to finding a balance between affordability and insurance needs, they tend to choose a product that deals with the inevitability of death rather than the likelihood of disability,” explains Chegwidden.

And before you think ‘it could never happen to me’, the stats show that the chances of a disability ruining your life are quite high. According to ASISA, African’s experience a total of 46 400 disabling events each year. In other words, there are127 disabilities occurring every day.

“After what happened to me, I now realise it can happen to anyone,” says James, “and I was someone who thought I had it all covered. ‘Benign’ MS is a serious oxymoron! Your doctor tells you that you have some disease, but that it won’t get worse, and then you realize it has hit you where it truly hurts – in your ability to get out and find work, your ego, your confidence and, worst of all, your rapidly depleting bank balance.

“I’m just another statistic in a situation that, I’ve discovered, goes across all income brackets.  I wasn’t in a wheel chair, I didn’t have cancer or a terminal disease, but there were many, many dreadful days that my seemingly invisible disability left me completely debilitated and unable to get out of bed, let alone work.  There was simply no predicting what kind of day ‘tomorrow’ would be for me. It was scary, and I was worried sick about where my next pay check would come from and how my family would cope.”

Disability comes in many forms

Many people wrongly assume that its freak accidents that will typically render you disabled. It’s true though that musculoskeletal and joint disorders are the leading causes of disability. However, illnesses like cancer, cardiovascular disease and gastrointestinal and neurological disorders also top the causes that prevent people from being able to work and earn an income again.

Depression can also render you disabled and unable to function properly at work. Registered clinical psychologist and CEO of the Heart and Stroke Foundation South Africa, Professor Pamela Naidoo says: “Depression is a common mental disorder characterised by lowered mood, negative thoughts, low energy levels and appetite disturbance. In its extreme form, it often meets the criteria for a Major Depressive Disorder (MDD) and individuals diagnosed with MDD often express suicidal thoughts.”

According to the World Health Organisation 300 million people suffer from depression worldwide. Young people, including children, can also get depressed. “In South Africa, the prevalence of depression among adults has been reported to be 9.7% for lifetime prevalence,” explains Professor Naidoo.

Affording disability cover

We are currently experiencing tough economic conditions and some experts say we are in a technical recession. Typically, consumers tend to ditch insurance like disability and life cover when they land in financial difficulty. It’s a tricky balance to achieve but affordability is key.

Ryan is quick to caution against creating further financial pressure in an effort to close the insurance gap:  “When it comes to getting the right type and amount of cover, timing is everything and it’s best to talk to a financial planner who can help to put a plan in place to close the gap year-on-year, as circumstances and budgets allow.”

*Not her real name.

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