Aviation Insurance Straight and Level- Protecting your income
By Franz Smit
Many consider income protection insurance to be of little practical value, but take a moment to read what happened to a client of mine, bearing in mind that this can be applicable to almost any occupation.
On an otherwise normal sunny day after completing a 3 hour charter flight, Christo* jumped on his BMW GS 650 and drove home from the airfield. He only made it about 150 meters before a car drove straight into him. Three days later and over R100 000 in medical bills he is back home, with a broken leg and foot that needed surgery - the first of a possible three, otherwise in good shape.
The doctors predicted a minimum recovery period of 6 - 9 months with weekly physiotherapy sessions and the hope of regaining full control and feeling in the leg and foot.
This was a major upheaval because he couldn't fly, and naturally he had to be replaced at work with a promise that they would give him first option back on-board as soon as he had fully recovered.
About 2 months after the accident, Christo remembered that he had taken out some form of insurance against his income and gave me a call. To cut a long story short, he was immediately paid the insured monthly amount for the 2 months he had already not been able to work, and now 15 months later, his insurance policy still continues to provide him with a monthly income.
What would have happened to him had we not sat down that day and had he not decided to insure his income?
Income disability insurance / Loss of licence:
This provides you with either a temporary income replacement or a permanent income replacement. The key is to have both temporary and permanent. Temporary income disability provides you with an income for the "smaller" events (such as breaking a leg) and will pay out for a maximum of 24 months. Should you then still not be able to fly/work and the condition is deemed to be permanent, your permanent income disability will kick in and pay you an income until your chosen option age (65 / 70 / whole of life).
For pilots who fly over weekends only, income disability can be provided. The only difference is that it would take your occupation into consideration, whereas full time pilots' income disability takes the loss of your licence into consideration at claim stage. If you cannot work, this insurance should replace your income.
There are currently only a handful of insurers in the South African market that is willing to offer loss of licence cover to pilots. I deal with them on a daily basis and the differences in benefit and premium can be substantial. One really needs to know what the policy wording refers to in order to understand what you are covered for.
What happens if an injury or illness prevents you from earning your usual income?
Ensure that you are adequately protected for when you need it the most. If the insurance premium looks too steep, I would suggest rather reducing the benefit slightly but keeping the comprehensive cover.
Loss of licence is a big buzzword at the moment and we have had great success in improving overall value for clients who had outdated existing insurance cover. Following intense research and negotiation with South Africa's biggest insurance houses, the average premium has decreased and the benefits on offer have improved substantially.
If you have had insurance for more than two years, now is the perfect time to review it as the benefits have never been this good and you can now get maximum value.
* Name changed to protect the identity of the client.
Franz Smit is the owner of www.pilotinsure.co.za and a representative of Netco Risk Management FSP no: 40265 providing independent financial advice. Franz specialises in the aviation industry.
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