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The word “retrenchment” is about as common as the other swear word in SA right now – “load shedding”. Maybe let’s add in “state-capture” for good measure as well!

The economic downturn has left companies reeling, and in the name of still turning a profit, Directors across the country have been wielding the axe for a good few years now. Far too many willing and able South Africans are sitting at home instead of being at work every day, and we can only imagine what that must feel like.

Have you recently been retrenched?

What did your company offer you in compensation, and was it enough?

The fact is that it’s never going to be enough if you can’t find a new job.

Can you insure against the risk of being retrenched? With job cuts left, right and centre. This would be a question worth finding an answer to. A quick Google search indicates that only a handful of insurance companies are interested in underwriting this type of risk.

The reason for that is simple. It’s called anti-selection.

Let’s assume for a second that you got wind (via the via) that your entire division was going to be made redundant in 6-months from now.

What would you do with that news? Based on the dire news, you might well be super-incentivized to Google “Retrenchment Cover” and get some before it’s too late. This is called anti-selection, and basically it means you are using the information you have at hand to take out a policy with the very real intention of claiming.

It’s the same thing people do when they find out they are terminally ill. They call up a life insurance company, lie that they know about their illness and take out cover. Then they cross their fingers and hope nobody finds out at the claim stage.

Retrenchments are rife, and while that represents an opportunity for life insurance companies to build and market new insurance products that can address these social-economic problems, it could also cost them a ton of money.

Most life insurance companies will find it too risky to jump into the “retrenchment cover” space. If you are looking to get a quote, go straight to Google. The companies’ advertising are definitely looking for your business (otherwise they wouldn’t be spending marketing budgets).

Just ask these questions before you decide on taking anything out.

  1. How long must I have been employed to qualify?
  2. How long is the waiting period before I can claim? It’s generally 6-months.
  3. How much of my income will be covered?
  4. How long will the insurer keep paying?

If you have any questions please send us an email by clicking here

The InsuranceFundi Team

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