The Association for Savings and Investments in South Africa (ASISA) says that the average South African is underinsured by 59% and this percentage is increasing year on year. It estimates that the families of South Africa’s 14 million income earners face a combined insurance shortfall of R28.8 trillion should these breadwinners die or become disabled.
South Africans income earners have a disability insurance gap of some R2 million each. To close the life and disability insurance gap, South African earners would need to spend on average an additional 4.2% a year of their personal income on life cover (R88 billion a year) and 2.4% a year on disability cover (R49 billion a year).
According to Instant Life, R1Million of insurance provides R4 000 in monthly income for a policyholder’s dependants. That means people among the top earners in South Africa (R500,000 a year and upwards) would need to look at getting around R4.5 million in cover to care for their families in the event they die or become disabled.
Lack of long term retirement planning and a culture of spending are some of the factors contributing towards inadequate insurance coverage. Through reducing expenditure on non-essential expenses and investing into a good insurance policy, underinsured earners and households can bridge the gap to ensure financial stability and income protection in the event of death or disability.
Collaboratively government and business can cultivate a culture of saving through education and reinforcement of the right behaviour. Financial literacy education can be amplified through technology; gamification is proving to be a globally effective method in bridging education and entertainment to bolster learning engagement.
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