Lump sum disability insurance is a type of cover that provides a once-off payment if you become permanently disabled due to an accident, injury, or illness. Here’s how it works in simpler terms:
Types of lump sum disability benefits
- Accelerated benefits: If you claim this benefit, it will reduce the life insurance cover you have on your policy. These are usually less expensive.
- Non-accelerated benefits: Claiming this benefit does not affect your life insurance cover. These tend to cost more.
Key points about lump sum disability insurance
- Permanent disability: The payout is tax-free but only happens if you’re permanently disabled and can never return to work. The insurance company needs to confirm this, which can take some time.
- Higher risk for women: Women, especially older ones, are more likely to face disabilities.
- Higher risk for younger people. Statistics from Sanlam show that people aged 30 to 39 are most likely to claim for sickness and disability.
Our approach at EFS
We suggest having both lump sum disability insurance and income protection to cover all bases. We calculate how much of each benefit you need.
In the next blog post, we’ll explain more about income protection.