The Graduate Backpack The case for income & lump sum benefits THIS IS AN OPTION FOR THE OPENING...

The Graduate Backpack The case for income & lump sum benefits

Insurance Financial Planning Retirement Investments Wealth

The Graduate Backpack

Why an income and a lump sum is a better disability combination

2015


… you have to protect

your income!

To pay the bills …

Protecting the earning ability of the GraduateSILSS Distribution Support


Growth Market Employment3,382,570

Tertiary 1,360,323

Non Professionals1,015,005

Degree / Diploma 939,111

Post 76,893

Professionals334,318

Degree / Diploma 245,493

Post98,825

Not Tertiary2,022,247

The new opportunity …

Graduate Opportunity

Source: BMR 2014Growth Market: R10k – R40k personal income p.m.



Every financial plan needs a solid foundation

Income Protection is the foundation

Proper Financial Planningfor all life stages

Sickness Benefit Extended Disability Income


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When income protection is the foundation …i.e. Sickness Benefit & Extended Disability Income

The financial

plan comes

together



We however have a bit of a challenge

Source: True South Actuaries & ConsultantsMarch 2013 Disability Cover Report - 2015 update

2011 2012 20130%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Lump Sum vs Income Protection Cover

Lump Sum Disability Income Protection



The report also says …

… only 38% of the truepermanent disability need actually covered

Source: True South Actuaries & ConsultantsMarch 2013 Disability Cover Report

… 7% to 25% of the true need for

temporary disability cover is actually

covered

“Sales is overly skewed to lump sum

cover”

“It is questionable whether the average

consumer understands the extent to which

they exposing themselves to risk”



What is the purpose of disability cover?

Post-disability financial lifestyle

Pre-disability financial lifestyle

~~Protecting the earning ability of the GraduateSILSS Distribution Support


How is this need addressed?Lump sum cover

Monthly income

Combination of the above



Do these benefits comprehensively address the need?

Certainty of payment

The GAP

Lump sum?

• Definition• Waiting period• Potential under-insurance

NO

IncomeYES

• Debt• Lifestyle adjustment Partially

CombinationYES

• Income needs matched• Debt settled• Lifestyle adjustment

possible

Absolutely YES

~~



Disability: Lump sum vs income Characteristics

• Permanence must be established• More difficult to claim• Longer waiting periods• Less claimable events• No possibility of multiple claims

• Permanent & temporary disability• Easier to claim• Shorter waiting periods• More claimable events• Multiple claims

Lump Sum Income

• Adjust lifestyle• Once-off expenditures e.g. debt• Specific needs e.g. education• Cover until date of retirement

• Replace income• Service debt / monthly obligations• Cover until date of retirement



Lump sum benefits - The challenges

• No benefit while permanence is being established

• Difficulty of managing the lump sum• Expose dependents• Expertise needed• Ongoing management & fees• Indirect tax implications

• Longevity of the lump sum• The “Lotto” effect

• Future income not guaranteed

• Under insurance

• Managing client expectations



Income protection – The benefits

• Credit rating protected• Insurance portfolio protected

(risk, investment, retirement, medical aid, short term)

• Standard of living maintained

• Income inflation-proofed

• Debt obligations serviced

• Better match to client’s need

• Peace of mind



The bottom line …

… a LUMP SUM should never be used to replace an INCOME!



The case for …A combination of income & lump sum disability benefits

Let’s look at

the number

s!



The lump sum disability story

Age Income Reality R -

R 1,000,000

R 2,000,000

R 3,000,000

R 4,000,000

R 5,000,000

R 6,000,000

R 7,000,000

R 8,000,000

R 9,000,000 Client details

Gender : MaleAge

: 35 anbSmoker status : Non-smokerIncome p.m. : R35 000Qualification : GraduateOccupation : AccountantDisability benefit : Regular occ.Taper benefit? : NoBenefit cease age : 65 anbGuarantee period : 5 yearsPremium pattern : Std age-ratedCover growth : 5%

Lump sum based on AgeR35 000 x 240 = R8 400 000

Lump sum based on Income75% of pre-tax income (R26 250), growing @ 5%, discounted @ 8%= R6 371 055

Lump sum based on “Reality”R6 371 055 x 40% = R2 548 422The client is under-insured!

R944 p.m.

R721 p.m.

R300 p.m.



The income protection story

Sickness BenefitR35 000 x 75% = R26 250 p.m.

Extended Disability Income R35 000 x 75% = R26 250 p.m.

No under-insurance

Sickness Benefit Extended Income Protector R -

R 5,000

R 10,000

R 15,000

R 20,000

R 25,000

R 30,000

R219

R75 p.m. R144 p.m.



The comprehensive disability protection story


Extended Disability IncomeR35 000 x 75% = R26 250 p.m.

2 x Annual IncomeR35 000 x 12 x 2 = R840 000

No under-insurance


R 5,000

R 10,000

R 15,000

R 20,000

R 25,000

R 30,000

R75 p.m. R144 p.m.

R112 p.m.

R840 000

R331



The comprehensive disability protection storyWith extra added protection


Extended Disability IncomeAdjusted to R23 625 p.m.

4 x Annual IncomeR35 000 x 12 x 4 = R1 680 000

No under-insurance


R 5,000

R 10,000

R 15,000

R 20,000

R 25,000

R 30,000

R75 p.m.

R130 p.m.

R410

R205 p.m.

R1 680 000



The future benefit storyPV at claim stage assuming permanent disability

Now @ 45 anb @ 60 anb R -

R 2,000,000

R 4,000,000

R 6,000,000

R 8,000,000

R 10,000,000

R 12,000,000

Lump sum

SB / EIP

SB / EIP / x2

SB / EIP / x4

Lump sum based on realityR6 371 055 x 40% = R2 548 422The client is under-insured!

SB / EDIR35 000 x 75% = R26 250 p.m.R35 000 x 75% = R26 250 p.m.

SB / EDI / 2x annual incomeR26 250 / R26 250 / R840 000

SB / EDIP / 4x annual incomeR26 250 / R23 635 / R1 680 000



Premiums paid for that future benefitPV at claim stage assuming permanent disability

Now @ 45 anb @ 60 anb R -

R 2,000,000

R 4,000,000

R 6,000,000

R 8,000,000

R 10,000,000

R 12,000,000

Lump sum

SB / EIP

SB / EIP / x2

SB / EIP / x4



The story at claim stage

Sickness Benefit

A dedicated email address

[email protected]

Generic requirements Sickness

Benefit Income

Protector

Lump Sum Disability

Claim form (4/8/8 pages) · · · Medical form (2 pages) · · · Medical report (minimum format) · Copy of ID · · · Copy of bank statement · · · Copy of sick leave certificate · · · Employer form (4 pages) · Job description · Copies of all medical reports (including board medical) · Proof of income · SAPS/IOD report in case of an accident · · Copy of discharge letter from employer ·



The story at claim stage

Sanlam Pays!

Sanlam pays

what you sell!



The story at claim stageNumber of claims paid

2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Lump Sum Disability Claims Sickness Benefit / Income Protector Claims

Sanlam Pays!



⧁ Graduates and professionals⧁ Smokers and non-smokers⧁ All premium patterns⧁ Automatic via SanQuote⧁ Discount available via Autonub⧁ Special quote request

⧁ Combination product⧁ Alterations ⧁ Matrix term cover

The discount story

The good news!

We now offering

graduates a 10% discount on lump sum

disability benefits!

Let’s make the most of this fantastic opportunity!



Our story

… it’s all about proper financial planning, that

gives your client certainty and a

financially secured lifestyle post-disability!



It’s a win, win, win situation!

Value for moneyProperly covered

Proper financial planning advice

Sanlam carries the bulk of your client’s risk



That’s why we are Wealthsmiths

Because we care about your

client’s wellbein

g!



thank you

The Graduate Backpack The case for income & lump sum benefits THIS IS AN OPTION FOR THE OPENING...

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