Why young professionals need life insurance now

Young professionals need life insurance early in their lives if they carry the financial responsibility in their households to safeguard the future of their loved ones. It might not be a top priority for young people who are just starting out, but this is actually the best time to think about taking out life cover.

Many young professionals are focused not just on being a success, but on enjoying life, often with no dependants to support.

“However, in the context of South Africa, there is a high probability that many young professionals who are starting out in their careers are also the breadwinners in their homes and carry the burden of financial responsibility as well,” says Elaine Markus, head of life insurance at Standard Bank.

“In South Africa, many young professionals financially care for parents approaching retirement age, younger siblings who need to be educated, or even grandparents with critical ailments. The likelihood of a younger person who is also the breadwinner having large savings to tide them over in any sudden financial emergency caused by their death, disability or illness is very low.”

When you consider that South Africa has a gross domestic product (GDP) growth of just 0.4% and food inflation is currently at a 14-year high, consumers have increasingly less disposable income. Markus says the reality is that life cover in these trying times is critical to manage and maintain your financial well-being, regardless of your age.

She also says that while life cover can be considered an extra monthly or annual expense, starting cover when you are younger ensures that you are taking responsibility for you and your family’s financial well-being, while it comes with its benefits.

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The younger you are, the lower the premiums

“On average, the younger you are when you take out life cover, the lower your premiums will be, as younger people tend to be healthier. The older you get, the higher the risk of developing medical conditions, increasing the risk of death or disability, which could result in higher premiums.”

As you age, the risk of death increases and so do the premiums for life insurance. If you buy life insurance in your twenties, you can lock in a lower premium rate, making it very affordable while you are young and healthy.

“If there is one thing the recent Covid-19 pandemic has taught us, it is that life is unpredictable and death and illness is not always selective. Age does not always matter when it comes to death, illness or disability and that is why it is so critical to ensure that you start as early as possible.”

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Markus warns that in the tragic event of your death, disability or illness, the last thing you would want is to burden your family with your debt. “If your debt cannot be settled, the house or vehicle that you bought will be taken back or repossessed and your family or dependants will be left without these resources that could be critical to their well-being.”

Total credit card debt for the South African middle class increased by 7% this year, with average credit card loan balances up 8% to more than R31 000. Your family will have to pay any debt you leave behind if you do not have sufficient credit insurance, Markus says.

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People under 30 more at risk

The 2022 ASISA Life and Disability Insurance Gap Study shows that young people, under the age of 30, who earn an income might be at higher risk of experiencing a significant shortfall in life and disability insurance.

“In layperson’s terms, if you become disabled due to injury or illness at a young age, you are more likely to require additional income for an extended period to cover living expenses, but also the additional expenses for your care, special medication or special equipment to help you function,” says Markus. 

This is a huge financial burden and one that most cannot afford without disability or serious illness cover.

According to research conducted by the Financial Sector Conduct Authority (FSCA), only 10% of South Africans have life insurance and that means that 90% of South Africans leave their loved ones in a dire financial position should they die or become disabled, further perpetuating the financial burden.

The most important asset to protect is your life and your ability to earn an income. Debunking the myth that all life insurance is expensive, Markus explains that there are flexible life insurance products to suit every lifestyle and every pocket size. Even if you start small, as long as you start, you will be on your way to making sound financial decisions for your future and that of your loved ones.