consider-income-cover-in-your-20s-and-30s Consider Income Cover in Your 20s and 30s

You may be forgiven for thinking that you are invincible when you are in your 20s and early 30s. Most of us may have this feeling because we have youth on our side and we’re generally fit and healthy. But the reality is that we also take the biggest risks when we’re young. We may not think of the consequences, which could be to our detriment. Certain illnesses, like cancer, also don’t discriminate by age.

From a financial point of view, it is actually in our 20s and early 30s when we’re more vulnerable, especially if we become severely ill or disabled and can’t continue to work. If you become critically sick or injured in your 20s, you still have the better part of 40 earning years to cover. If there’s no insurance to back this possibility, none of us will likely have enough savings to see us through to retirement.

Karen Bongers, Product Development Actuary at Sanlam Individual Life, explains: “Income protection policies protect you financially against the inability to work as a result of illness or injury, whether temporarily or permanently, so they cover you over both the short- and long term. If you get injured or become too sick to work, your living expenses will unfortunately still continue, so it’s important to have this type of cover in place ahead of time. Having an income protection policy in place means you’ll continue receiving an income, as if you were still earning.”

The added benefit of taking out income protection at a young age is that the premium is likely to be lower, barring any loadings associated with working in a dangerous environment or participating in risky sports. People in their 20s and early 30s pay lower premiums on the whole.

“It’s difficult to give an average premium amount, as many factors are taken into account when determining someone’s premium, like their age, sex, income and whether they smoke. However, it is usually a small monthly premium for a whole lot of protection. Younger people are usually healthier, so can typically get cover on good terms, which means no medical exclusions or extra premium loadings. Even if the likelihood of you getting injured or disabled is perhaps relatively small, the point is that the financial impact is severe if it does happen, so it is essential to be protected against it,” says Bongers.

What disability claims do people make?

Injuries to bones, backs, joints and connective tissue accounted for the most income protector claims (29%) in Sanlam’s 2020 claims statistics. This was followed by accident and injury, which accounted for 16% of claims. “Short-term injuries like broken bones from a mountain-biking accident can affect people in their 20s and 30s, but here people also underestimate the impact on their finances if they can’t work for a month or two,” says Bongers.

Mental disorders accounted for 13% of claims in 2020. The risk of mental illness should also not be discounted among those in their 20s and 30s. Depression, in particular, can be a very debilitating mental illness that could prevent you from functioning at work or could even prevent you from doing the most basic of tasks. Cancers were also top of the list, accounting for 12% of claims.

Musculoskeletal conditions were claimed for the most by both men (31%) and women (27%). Meanwhile, 17% of claims made by women were for mental disorders, while accidents were the second most frequent claim made by men, accounting for 24% of cases.

Young people made claims too – 20% of claims were made by those aged 35 and under, while 26% of claims were made by those aged 36 to 45.

Who should get income protection?

If you are part of the working population, there’s no age or circumstance in which income protection should not be considered. Those without dependants should also consider income protection as priority cover. “Some people think they don’t need it if they don’t have dependants, and only need it if they are married and have children. However, income protection is something you should take out as soon as you start working, as it protects you as much as any dependants you may have,” says Bongers.

If you’re young, you’re likely to be healthy, so getting extra protection against injury and illness may be the last thing on your mind. But the reality is that accidents, injuries and illnesses could happen to anyone. It’s better to be safe than sorry. If you’re unsure how much income protection you need to adequately cover yourself, speak to a financial planner today.

Please consult with a financial planner before you take any action regarding your policies. Sanlam is a Licensed Financial Services Provider.