1. Death Income Benefit

2. Let’s look at the industry statistics
Other
Critical illness
Disability cover
Life cover
61%
29% 9% 1%
Diversification?
82% - Lump sum
18% - Income
Source: True South Actuaries & Consultants
March 2013 Disability Cover Report
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3. Why focus on the Death Income Benefit?
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4. How do we play the game currently?
Convert the income need to an equivalent lump sum benefit
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5. The danger of a lump sum equivalent
Using a lump sum to replace an income is risky
Consumer exposed to material risks
Behavioural perspective - large lump sum
Theoretical perspective – fundamental mismatch
Major task of financial planner – protect against mismatching risk
Question - What happens when a life insurer needs to provide for an inflation-linked income from a lump sum?
Answer - The insurance regulator would require the insurer to hold extra assets to the value of between 32% and 41% of the value of the lump sum!
Source: True South Actuaries and Consultants
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6. The danger of a lump sum income equivalent
Do you do the same?
Up to 41%
To genuinely cover the risk
Source: True South Actuaries and Consultants
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7. Use lump sum benefits to settle lump sum needs
Let’s go back to basics
Use lump sum benefits to settle lump sum needs
Use income benefits to settle income needs
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8. Death benefit needs
Lump sum needs
Income needs
Mortgage
Car
Final expenses
Estate duty
Executors fees
Electricity
Rates
Levies
Phone
Insurance
Policies
School fees
Medical Aid
Petrol
Gym
Food
Maintenance
DSTV
Piano, ballet
Use lump sum benefits to settle lump sum needs and income benefits to settle income needs
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9. Death Income Benefit - the good news …
Death income benefit rates discounted
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10. Death Income Benefit in action 2016.1 pricing basis
Scenarios
Cover amount
Payment p.m. 1
Death lump sum R
R533 2
Death income*
R p.m.
R629 3 R
R p.m.
R75
R419 4 R
R113
Client details
Female, 30 anb, NS
Graduate, RG4,
Income – R p.m.
Needs
Debt – R
Income p.m. – R20 000
R494
R532
*To 85 anb, income increasing at 5% p.a., age-related premium pattern
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11. Death income – the benefits
Guaranteed monthly income
Free of income tax
Inflation-proofed
Waiver of payment
Minimum payment period - 5 years
A living legacy
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12. Death income benefit What happens at death? – life insured
Death of life insured
Estate dutiable event
PV of future payments
Estate duty payable by the person to whom it benefit accrues
Death Income Benefit
Beneficiary (Compulsory)
Beneficiary
Spouse – 4q (no estate duty)
Child – estate dutiable
Trust – estate dutiable
Provision for possible estate duty
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13. Death income benefit What happens at death? - beneficiary
Death of beneficiary
Beneficiary receiving the monthly income
Estate dutiable event
PV of remaining payments
Asset in the estate
Provision for: - estate duty - executors fees
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14. Death income benefit Estate duty calculator
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