Few could have predicted the impact that COVID-19 is having on the world and while there are many uncertainties that we’re still grappling with, there is also a growing realisation of how important it is to protect what we have. Hopefully, for most of us, any current impact on our ability to earn an income is temporary. While the majority of COVID-19-related loss of income to date has been because of business interruption, it does put the focus on the importance of preparing for loss of income from illness or injury – even more so if such a loss is permanent.
Karen Bongers, Product Development Actuary at Sanlam Individual Life, suggests laying a solid financial foundation to protect your earning ability from your very first salary. “Protecting your income to mitigate against risk such as the long-term inability to earn an income, is critical. Disability cover protects you against the inability to earn an income as a result of illness or injury, and against the costs of living with a disability even if you can still work.”
Here are some things Bongers suggests you consider to prioritise your finances and protect your ability to earn an income:
- List your expenses and carefully prioritise each according to the impact these may have on your finances in the long term. What spending habits do you have that may compromise your financial wellbeing and how can these be replaced with wise commitments around the protection of your income, your family and your lifestyle?
- While it’s ideal to have an adequate amount of disability cover in place, it’s wise to at least take some level of cover if affordability is a problem, as opposed to being completely exposed
- Don’t assume that disability is only linked to the chance of having an accident. Heart disease, cancer, back disorders and depression are examples of conditions that can incapacitate people and have a devastating effect on their earning ability.
- Don’t assume that your employer offers disability cover – it is vital to ask. Remember, group plans may also come with limited cover not personalised to your profile. Plus, any cover could immediately fall away should you change jobs or lose your job.
- Cancelling something like disability cover should be a last resort, as the absence of it can plunge you into serious financial strain should you be left unable to earn
- Don’t rely solely on your savings, because most people’s savings won’t stretch to cover their monthly expenses should they be rendered incapacitated in the long term
- It can be difficult to invest in something for the long term, but by making the right decisions early, you can be prepared for the future