Here’s a question for young working South Africans: what is your most valuable asset? It’s not your property, nor your retirement savings — it’s you.
Unless you are already retired or approaching retirement, your ability to work and earn an income is far more valuable than any assets you may have accumulated. It is therefore vital to protect yourself as a living asset.
Long-term insurance generally consists of life cover and disability cover. If you are young, single, and do not yet have dependants, life cover is not essential. It becomes necessary once you start a family and have financial responsibilities.
Disability cover, however, is essential from the very beginning of your career. If you become disabled and unable to earn an income, you will still have the rest of your life to live — making this form of protection your top priority as a young professional.
Last week, the Association for Savings and Investment South Africa (ASISA), in partnership with actuarial firm True South Advisory, released its 2025 Insurance Gap Study. The study examined the widening gap between the life and disability cover South Africans should ideally have and what they actually possess.
Conducted every three years, the study assessed insurance levels among 16.1 million formally employed income earners in South Africa as of the end of last year. It revealed that the average income earner, aged 39 and earning a net annual income of approximately R251,000, would need at least R2.1 million in life cover to ensure their family could maintain their living standard in the event of their death. However, the average worker has only R800,000 in cover, leaving a shortfall of R1.3 million — meaning they are just 38% covered.
The lack of disability cover was equally concerning. The study found that the family of the average earner would require R3 million in disability cover to sustain their standard of living. With actual cover averaging only R1.2 million, this leaves a gap of about R1.8 million, or just 40% coverage.
Besa Ruele, a member of ASISA’s Life and Risk Board Committee, highlighted that actuarial data indicates approximately 440 income earners are expected to die each day in South Africa this year, while around 145 are likely to become disabled. This means roughly 214,000 households will face the death or disability of a breadwinner in 2025 — forcing many to either reduce their standard of living or seek alternative income sources.
Ruele emphasised that the financial consequences of a permanent disability can be severe. Unlike in the case of death, the family size remains unchanged, and a disabled person often requires ongoing and expensive medical care.
Types of Disability Cover
There are essentially two types of disability cover — lump-sum cover and income protection cover.
A lump-sum policy pays out a single amount once disability is proven. It is then up to you or your family to invest that money wisely to generate a sustainable income.
Income protection cover, on the other hand, provides you with a monthly income as though you were still earning. This is paid at a chosen percentage of your pre-disability income and usually increases annually in line with inflation. Payments continue only until retirement age, so you will still need to fund your retirement by setting aside part of this income for long-term savings.
According to Bidvest Life’s 2024 Claims Report, clients were 15 times more likely to claim for income protection than for death benefits, and 43 times more likely to claim for income protection than for permanent disability. The report also revealed that younger South Africans accounted for nearly half of all income protection claims, while death claims were concentrated among older clients.
Ideally, you should have a combination of income protection and lump-sum cover. Financial advisers generally recommend lump-sum policies for immediate, once-off expenses such as paying off a home loan, modifying your house or vehicle to accommodate a disability, or providing for your children’s education.
However, lump-sum policies can fall short when it comes to meeting long-term income needs. The effectiveness of investing a lump sum to generate ongoing income depends on assumptions about inflation and investment returns — both of which can fluctuate. There is also the risk of spending all or part of the lump sum on non-essential expenses.
While income protection cover is generally more expensive than lump-sum cover, it has the added advantage of covering temporary disabilities — for example, extended time off work due to a serious accident. In fact, 36% of Bidvest Life’s income protection claims in 2024 were for temporary conditions that would not have qualified under lump-sum disability definitions.
Although some employee benefits include disability cover, experts advise speaking with a qualified financial adviser to assess whether you need additional private cover. Ensuring adequate protection now can help safeguard your family’s financial stability should illness or injury prevent you from earning an income.