SELF-EMPLOYED? Must-haves for disability income protection

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1 SELF-EMPLOYED? Must-haves for disability income protection With no sick leave or employer-sponsored benefits, income protection is even more important if you're self-employed. And, it s not just about the individual. Losing a business because of disability could have a major impact on your dependants and employees Will my claim get paid and how much will I receive? Can I get cover that matches 100% of my needs? Can I change my cover at a later stage without further underwriting? For more information, contact or visit Insured by Guardrisk Life Ltd FSP 76. FMI is an authorised Financial Services Provider. FSP 2717.

2 01 Will my claim get paid and how much will I receive? 01a Will my claim get paid? No employee-sponsored benefits and cash-run businesses make fast, reliable claim payments a big deal for the self-employed. FMI has more than 20 years specialist experience in occupational disability assessment. That s more than anyone else in the industry. And, as most claims are paid on this basis, that s what counts when it comes to getting a claim paid. Plus FMI's fast-track options make claiming even easier. Based on our extensive claims experience, our additional claims criteria reduce subjectivity in the assessment process and allow claims for certain common temporary conditions (like fractures) to be fast-tracked for quick and easy pay-outs. Partial claim? Loss of income may be greater that you thought... With FMI, you can choose to have your partial claim assessed on a percentage disabled or loss of income basis. The result? The highest possible pay-out! Most insurers pay partial claims on a percentage disabled or loss of income basis but use either one or the other, or don t give you the choice. Plus, with FMI, you can change your mind. If you return to work and find your loss of income is actually greater than you thought, you can switch from a percentage disabled to a loss of income basis up to 30 days after your claim is closed and be paid the difference! Bryan the Plumber Fall resulting in dislocated shoulder. No manual work for 3 months. TIP Cover: R per month Average earnings: R per month 50% manual I 50% admin Paid on a % Disabled Basis Paid on a Loss of Income Basis 50% disabled, so no income earned Paid = R Can t do manual work so no income earned Paid = R In this case, FMI s loss of income option means a bigger pay-out for Bryan (R as opposed to R60 000). There are examples where a percentage disabled approach results in a higher claim pay-out. Loss of income can be an onerous requirement at claim stage or your loss might only occur after you have returned to work. By allowing you to choose the basis on which your claim is assessed, FMI ensures that you are not adversely affected when you are still partially able to work

3 01b How much will I receive? Working for yourself means your income might not be the same every month. You could receive payment for work you did before you were disabled. But you'll probably struggle to get back to your pre-disability earnings when you do go back to work. You don't want to have to worry about payments being reduced or having to prove loss of income. Situations like this make aggregation and loss of income rules a big problem for the self-employed. Aggregation Aggregation rules allow insurance providers to reduce claim amounts against income earned from work or other disability benefits. If you have a variable income, you could end up with less than you expected to receive. FMI will never aggregate a temporary income protection claim pay-out against income earned from working. Only after the first 12 months of a temporary claim will FMI aggregate against payments made by another insurer. Proof of loss of income Proof of loss of income entails proving your income and the amount lost during the disability period. This can reduce claim amounts. For those with a variable income, proving your income and the amount lost during the disability period can be difficult at claim stage and your pay-out amount could be seriously affected. FMI doesn't ask for proof of loss of income. You get paid what you need, when you need it. Siya the Adviser Injuries as the result of a car accident. Unable to work for 12 months. TIP Cover: R per month Average earnings pre-disability: R per month - R primary commission (new policies) - R secondary commission (policies sold 12 months prior) Claiming with FMI Earnings post-disability: - 1st month: R primary commission (policies sold just before accident) - Entire disability: R per month secondary commission (policies sold 12 months before accident) Claiming with Competitor R per month TOTAL PAID over 12 months: R Payments exceed pre-disability earnings but when Siya returns to work it will take a year for his earnings to return to the same level as before. AGGREGATION from day 1 1st month: R Rest of months: R TOTAL PAID over 12 months: R Siya will only earn R per month for the first year back at work, because he will not earn any secondary commission. With no aggregation, Siya receives enough for both the period while he can t work and the period when he returns to work but his income has not recovered yet. The FMI approach recognises that policies that aggregate against income earned while disabled can leave a gap in cover on return to work

4 02 Can I get cover that matches 100% of my needs? If you need your full income every month, then insuring anything less than 100% from the day earnings stop until the day you would have retired is just not enough. If you re self-employed, that income might not be just salary what about monthly dividends or bonuses? FMI takes into account all active income sources, allowing you to cover 100% of your earnings for the first 24 months on a temporary disability basis and, beyond 24 months, until retirement age, 100% of earnings on an extended disability basis. This means you are 100% covered from day 1 until the day you would have retired. After 24 months, most insurers limit pay-outs to 75% of income. What if your disability lasted longer than 2 years? Could you survive with only 75% of your income? You shouldn t have to. Is the cover flexible enough to meet my needs? Income protection needs to be flexible to be effective one size most definitely does not fit all. Even more so for the self-employed, many of whom don t have formal tertiary qualifications or job titles. Does this describe you? You run the risk of being charged higher premiums or offered unfavourable terms by insurers who don t really understand how you work. At FMI, our unique risk assessment model treats the self-employed are professionals in their own right, taking into account their actual role in their business and focusing on their experience and expertise. This translates into better terms upfront and fewer issues at claim stage. Traditional insurers often charge a higher premium to those who don t have a tertiary qualification or specific job title. What about waiting periods and benefit terms? Without sick leave pay, self-employed individuals need their claim pay-outs as soon as possible. This means temporary income protection is essential cover. And, while shorter waiting periods cover more of your disability, longer waiting periods have a cheaper premium so a choice of waiting periods and benefit terms is best. FMI offers a choice of 4 waiting periods (7, 14, 30, 90 days) and 4 benefit terms (3, 6, 12, 24 months). FMI offers a 7 day waiting period for self-employed individuals, with benefit pay-outs backdated to day 1, which means your business won t suffer from a lack of cash flow. Plus, only FMI allows you to split your cover across multiple waiting periods. A choice of terms and the ability to split cover means the best cover for your needs at the lowest possible premium! Andre the Business Owner Needs cover from day one. TIP Cover: R per month. Waiting Period: 7 days Average earnings: R per month Premium: R Cover split over waiting periods: R Waiting Period 7 days R Waiting Period 14 days R Waiting Period 30 days Premium: R Difference in monthly premium: R77.27 With FMI, splitting cover over waiting periods means cover that matches different needs and a cheaper premium

5 03 Can I change my cover at a later stage without further underwriting? Life changes and so should your cover. However, increasing your cover might put you at risk, especially if you have to undergo underwriting every time you do so. And, if you re self-employed with a volatile income stream, a standard annual inflation option might not be sufficient. FMI boasts the strongest future insurability guarantee on the market. Along with standard increases, you can increase your cover by more than with any other insurer even if you were not accepted at standard rates, have claimed before, or have a health loading. Plus, once you have cover with us, you can suspend, reduce, and increase cover as your needs change, all without additional medical underwriting and few restrictions. We also offer options to freeze or change cover over time. This ensures that your cover remains in line with your needs. A future insurability guarantee allows changes to cover levels without further underwriting. Some insurers offer guarantees that allow for once-off or annual increases, but these are often subject to tight eligibility rules and may not apply if you ve claimed before or have a loading. Taryn the Financial Adviser Asthma health loading. Wants to increase cover by 5% per year to make up difference between annual earnings increase and selected annual benefit increase. TIP Cover: R per month Average earnings: R per month Annual Earning Increases: average 15% Annual Benefit Increase selected: 10% FMI Other Product Providers Annual benefit increase Plus, a 20% increase at each policy anniversary until age 35 and thereafter by the lesser of CPI x 2 and 20% Ability to keep cover levels in line with income despite loading Annual benefit increase only Excluded from other Benefit Increase options Requires underwriting for any increase Increase may be rejected FMI IS THE BEST CHOICE FOR THE SELF-EMPLOYED We understand how self-employed people really run their businesses and offer them products to suits their needs. The result? Complete and effective cover! - 4 -