The importance of life insurance for young South Africans

When it comes to protecting your income, if you become disabled or pass away, many young South Africans in their 20s and 30s think it’s something to worry about “later”, after you’ve bought a home, climbed the career ladder, or started a family. But this mindset can end up costing more than you realise.

Have you ever thought about how many pay cheques stand between you and your retirement? The younger you are, the more income you still have to earn, and that’s your greatest financial asset: Your ability to earn a salary is what makes everything else in your life possible, from rent, groceries, and savings, to future investments. That’s why protecting it early with income protection cover makes good financial sense. And yet, many young professionals fall into the trap of putting it off. Why? Because of a little thing called present bias.

Present Bias: the invisible barrier to protecting your most valuable asset

Present bias explains why it’s easy to ignore long-term planning like life insurance or income protection when you're young and healthy. The idea of a life event that could stop your income, like a serious illness or even death, feels remote. Instead, we focus on what’s right in front of us: student loans, social life, helping out at home, or upgrading our tech.

 But ignoring the risk doesn’t make it go away. According to a BusinessTech poll, more than one in three (35%) middle-class South Africans aren’t putting anything aside for their financial future. This means people are unprepared for any unexpected loss of income that could derail their financial progress overnight.

 As highlighted by BrightRock, most of us insure our homes, cars, businesses, and possessions, but neglect to protect our income, despite it being the thing that pays for all those things. But if something happens to you that interrupts that income stream, your entire financial ecosystem could be under threat.

 How many paycheques will it take to secure your financial future?

Think about it: over your working life, you will earn hundreds of pay cheques. They’re the building blocks of your lifestyle and future plans. But what if something happened to you tomorrow that stopped those pay cheques from coming in, like an illness or disability?

Protecting your income is not just for people in their 40s with mortgages. It’s something every working young adult should consider. Taking out income protection early means you’re covered when you’ve got the most pay cheques left to earn, and you’ll likely lock in lower premiums while you're still young and healthy. Over time, as your income grows, your cover can grow with you, ensuring that your lifestyle remains secure, even if your ability to earn is compromised by an illness or injury.

Why delaying life cover costs more than you think

In the same way, compounding works for saving money, and early planning works for life insurance and income protection. Starting late means paying more for less, as your risk profile will have changed, and cover is more expensive when your risk of claiming is higher.

For example: A 25-year-old non-smoker might pay a small monthly premium for a robust life insurance policy that protects their income. If you wait until 40 to get one, you could be less fit and healthy and even have a pre-existing condition like high blood pressure or raised cholesterol, which could make it harder or more expensive to get the same protection.

How to break the present bias cycle

·       Start small, scale up. You don’t need to get everything sorted on day one! Even a basic life policy or income protection benefit gives you a foundation to build on. If you don’t have financial dependants, start with disability cover and then add life cover later, when your death would impact people who rely on your income.

• Educate yourself. The more you understand about how life insurance works and why it matters, the easier it is to commit. Check reputable sources and consult trusted independent financial experts to learn more about life insurance.
• Speak to an independent financial adviser. Get tailored advice that helps you align your protection plan with your life goals – and remember to regularly meet with your financial adviser as your life changes.

 Your future self is counting on you

Life insurance may not feel urgent when you’re young, healthy, and just getting started but every year you delay is a missed opportunity. For young South Africans navigating debt and rising costs, it’s easy to focus only on today. But protecting your income now means having financial security in the future.

* Hanlon is an executive director at brightRock.

PERSONAL FINANCE