Media Release
Association for Savings and Investment South Africa (ASISA)
9 September 2015
5 reasons to get insured in your twenties
Your twenties are brimming with opportunities and possibilities, and heeding expert advice to buy
insurance to cover life-changing events such as death and disability may be the last thing on your mind.
While not a fun way to spend your money, putting risk cover in place when you are young is something you
will come to appreciate later in life.
Peter Dempsey, Deputy CEO of the Association for Savings and Investments South Africa (ASISA), says the
perfect time to get risk cover is when you are young and insurable.
“You’re in your prime in your twenties. You are starting your career, making your first purchases and
having fun. Life is an adventure. So why buy insurance?”
Dempsey lists five main reasons why you should buy life and disability cover in your twenties, emphasising
that this protection will always form the cornerstone of your future financial planning.
1. You’re most at risk
Dempsey warns that in your twenties you are statistically more at risk of being involved in an accident
that may result in death or disability.
Research conducted by Statistics South Africa in 2013 into causes of death in South Africa showed that
death rates reach a peak between the age of 20 and 34 years. Just over 42% of all deaths in the 15 to 29
year age group were from non-natural causes, including accidents and road crashes.
Dempsey points out that in the majority of accidents causing these deaths many more would have been
injured and possibly even left disabled.
“Therefore, the first risk cover you should buy in your twenties is disability cover, because not only are
you at the highest risk of becoming disabled, but you also have the most to lose in terms of earnings,”
says Dempsey.
Dempsey points out that the younger you are when you become disabled, the higher the lump sum benefit
that you require to survive financially.
“The older you are, the greater the likelihood that you have made provision for retirement. On the other
hand, a young person who becomes disabled and can no longer earn an income would have to rely on the
one lump sum disability benefit payment for a lifelong income.”
Dempsey notes that for this reason a trusted financial adviser could also recommend a disability benefit
that pays a monthly income instead of a cash lump sum.
2. You’re in your prime
“Instead of thinking that you don’t need insurance because you’re healthy, consider that getting insurance
will be cheaper and easier if you’re healthy,” states Dempsey.
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He notes that people in their twenties are far less likely to have developed illnesses and conditions that
may drive up premiums or place limitations on the insurance cover they may qualify for.
According to the ASISA 2013 Life and Disability Insurance Gap Study, which measures the difference
between existing life and disability cover and the actual insurance need of South African earners,
individuals were underinsured by R9.3 trillion for life cover and R14.7 trillion for disability.
“We need to develop a habit of hoping for the best and preparing for the worst,” says Dempsey. “The best
time to put sunscreen on is before you lie in the sun. It’s too late when you’ve already been burnt – and
insurance is no different.”
By joining the insurance pool in your twenties, you can enjoy the benefits of a healthier insurance profile
and may be developing healthy savings habits for the future, says Dempsey.
3. You are likely to have debts
South Africans are some of the most credit active consumers in the world with a household debt to
disposable income ratio of 78.4%. The cost of debt has also increased with the recent 0.25% raise in the
interest rate, adding to individuals’ debt responsibilities.
Dempsey points out that since you are starting out in your twenties, you are unlikely to have enough
savings to cover debts should you die or become disabled.
“If you pass away, the weight of these debts could fall on your loved ones. If you’re left disabled, you’ll
have the added burden of medical expenses and loss of income, while still needing to cover these debts,”
says Dempsey.
“Having adequate financial protection already in place will protect you and your family from financial
devastation should you fall victim to a life-changing event such as death or disability.”
4. You may be starting your own family
Life and disability cover become really important when you start a family as this will provide financial
support for your partner and your children should something happen to you.
Dempsey points out that disability places an even bigger financial burden on a family than death, because
not only does your income fall away, but living with a disability is also expensive.
In the year to June 2015, life insurers paid benefits of R366.8 billion to consumers, providing thousands of
South African’s with vital benefits following events such as death or disability. Dempsey notes that this
money will have helped families pay off debts, cover day-to-day living expenses, fund children’s education
and pay for medical costs.
5. Premiums are cheaper when you are young and healthy
Premiums are priced according to the amount of cover required and are also influenced by factors such as
age, gender, occupation and health. Women generally pay lower premiums than men, and non-smokers
lower premiums than smokers. Dempsey thus urges people in their twenties to take advantage of their
favourable insurance profile.
Dempsey points out that insurance premiums are very affordable when you are young and healthy. You are
also able to add extra benefits to your policy such as guaranteed insurability later in life when you may
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want to increase your cover, as well as premium waiver cover whereby your premiums will be paid by the
insurer if you are no longer able to earn an income due to disability, dread disease or retrenchment.
Take the example of a 25 year-old male with a degree and an office job that earns him a monthly income
of R15 000. He takes out life and disability cover for R1 million. Provided that he is healthy, does not
smoke or engage in dangerous activities, his low-risk profile means that he could qualify for premiums as
low as R146 per month for life cover and R105 for disability cover.
The same man only ten years older at the age of 35 years would be paying premiums of R192 each month
for life cover and R160 for disability cover, provided he has not developed a serious illness.
Arguably he would have saved money spent on insurance premiums in the last decade, but if he has
developed a serious illness, he would have to pay substantially higher premiums with limitations on his
cover in future – if he qualifies for cover at all.
The table below shows how premiums would escalate by age for the man in the example referred to
above. Disability cover is excluded for people over the age of 65, as disability benefits for income loss are
only paid to people until the age of retirement, or 65 years.
Age of Entry (Age next birthday)
25
30
35
40
45
50
55
60
65
70
Source: Sanlam Personal Finance
Death Benefit
R 146
R 156
R 192
R 256
R 355
R 534
R 813
R 1 150
R 1 956
R 2 998
Disability for Regular Occupation
R 105
R 136
R 160
R 216
R 291
R 476
R 608
R 813
Since your unique personal circumstances will determine the risk cover that you buy, Dempsey emphasises
the importance of consulting a trusted financial advisor before signing up for a product that may not meet
your long-term needs.
“Ultimately, you need to consider the opportunity your age represents for getting financial protection,”
says Dempsey.
Ends
To set up interviews please contact:
Lucienne Fild
Independent Communications Consultant
082 567 1533
[email protected]
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Issued on behalf of:
Peter Dempsey
Deputy Chief Executive Officer
Association for Savings and Investment South Africa (ASISA)
ASISA represents the majority of South Africa’s asset managers, collective investment scheme
management companies, linked investment service providers, multi-managers, and life insurance
companies. These members hold assets under management of more than R7.8-trillion.
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