Can You Even Buy Retrenchment Cover Nowadays?
When the economy stutters, businesses feel the heat, and job losses are inevitable! A recent article published on the Business Tech website summarises the CCMA’s annual report for 2018/2019, revealing some of the sectors that have been hit the hardest by recent retrenchments. We will provide a link to that article a little later in the post. Right now, let’s deal with another question:
In an economic climate like ours, wouldn’t it make sense to have some retrenchment cover in place?
If you lose your job because of a retrenchment what is going to happen to the salary cheques you’ve been clearing?
You will be entitled to severance pay equal to one week’s worth of pay for each completed year of ongoing service. Leave that’s due to you will also be included in your final remuneration wrap up, but let’s assume you’ve been employed for 4-years.
Basically, that means you’ll only get another month’s salary as your retrenchment package (excluding the leave pay). That’s it!
Having a policy in place that could cover your salary for 6-months to a year would be handy in a crisis like this, wouldn’t it?
A retrenchment cover policy is designed to do just that.
If you become retrenched the policy will pay out a % of your take-home salary for a defined period of time.
There is only one issue – Retrenchment policies are about as scarce as hens’ teeth.
Insurance companies just don’t offer them right now.
And the reason is simple. They don’t want to lose money!
Remember insurance companies are in the business to make money and issuing thousands of retrenchment policies to South Africans, who run the very real risk of claiming, isn’t a great business strategy.
What these insurance companies are worried about is “anti-selection”.
People who have a sense that they might be retrenched could easily take out a policy (even wait out the general waiting period) and claim as soon as HR delivers the dreaded notice.
In fact, a quick Google search for the words “Retrenchment Cover” would suggest that only a handful of insurance companies are in the market. Type the keywords “Life Insurance” into your browser and see how competitive it is 🙂 A much better risk for an insurer, right?
If you are looking for a product like this, make sure you don’t get it confused with “income replacement” cover. That cover is designed to cover you against the risk of becoming disabled (because of illness or injury) and as a result not being able to perform the functions of your job.
Retrenchment cover and income protection insurance are two different types of products altogether and they cover two separate risks.
If you are looking for retrenchment cover, start with a Google search. Companies that are happy to take on this risk will be advertising for sure.
Make sure you check out the terms and conditions of the cover.
There will be a waiting period before you can claim and the pay-out will be subject to you being employed for a certain number of years.
Remember you can get a bunch of life, disability and income replacement quotes with MoneyShop.
Here is that article we promised you earlier in the post.
Until next time