Life insurance for the gig economy and SMEs: What you need to know
Posted on 13 Sep, 24 by BrightRock
The gig economy and small and medium enterprises (SMEs) are pivotal to South Africa’s economic landscape. With unemployment rates soaring and traditional job opportunities becoming increasingly scarce, more South Africans are turning to freelance work and entrepreneurship. While these sectors offer flexibility and innovation, they also present unique challenges, particularly regarding financial security and risk management. One crucial aspect often overlooked is life insurance.
The South African gig economy and SME landscape
South Africa’s gig economy is experiencing rapid growth. A study by the World Bank in 2022 highlighted that approximately 10% of the country’s labour force is engaged in some form of gig work. This includes freelancers, independent contractors, and part-time workers. Similarly, SMEs play a significant role in the economy, making up more than 90% of formally registered businesses in South Africa. They employ more than half of the labour force, and account for more than a third of GDP, according to a report by the South African Business Integrator.
The Importance of life insurance for gig workers and SME owners
Life insurance provides a financial safety net for individuals and their families in the event of unforeseen circumstances, such as death or severe illness. For gig workers and SME owners, this safety net is crucial. Many gig workers and SME owners are the primary breadwinners for their families. Life insurance ensures that dependants are not left destitute if the worst happens. Moreover, for SME owners, life insurance can be a key element of business continuity planning. It can provide the necessary funds to settle debts, manage operational costs, or even facilitate a smooth transition of ownership. Owners often have personal and business-related debts. Life insurance can cover these liabilities, preventing the burden from falling on family members or business partners. Knowing that there is a financial backup in place allows individuals to focus on growing their business or career without the constant worry of financial insecurity.
Identifying challenges in accessing life insurance
Despite the clear benefits, gig workers and SME owners face several challenges when it comes to securing life insurance. Unlike salaried employees, they often have fluctuating incomes, which can make it difficult to commit to regular insurance premiums. Insurance companies may view SMEs and freelancers as higher risk due to the instability associated with their income streams. This can result in higher premiums or even difficulty in obtaining cover. Additionally, many individuals in these sectors are not fully aware of the importance of life insurance or how to go about obtaining it.
Tailored Solutions for the South African Market
Addressing these challenges requires a tailored approach from insurers. Traditional business insurance plans are inflexible, and structured like personal life insurance, which doesn’t always fit the unique needs of businesses.
Clients face significant challenges with their insurance cover when they become self-employed or experience a loss of income. For those with fluctuating incomes or a lag between work done and income received, providing proof of loss of income can be difficult, which often prevents them from receiving payouts from their insurer during temporary disability.
Insurance is an essential component of financial planning for the SME sector in South Africa. By addressing the unique challenges faced and offering tailored solutions, insurers can play a pivotal role in enhancing the financial security and resilience of a significant portion of the workforce. With the right products, education, and support, insurance can provide the peace of mind that allows entrepreneurs to thrive in their entrepreneurial endeavours.
This article was first published on Independent Online News on 1 September 2024 and is attributed to Schalk Malan, BrightRock’s Chief Executive Officer. Click here to read the original story.
Sign me up
Speak to your adviser, or sign up to have one contact you
Fill in your details, and we’ll have an accredited financial adviser contact you.
Want us to get in touch?
Fill in your details, and we’ll call you.
Want to report suspicious online activity?
We live in a digital world where information and data can be shared across the globe in a matter of minutes. With cybercrime on the rise, we want to help ensure you’ve got the tools to keep yourself safe and informed.
Call our 24-hour helpline on 086000 6335, manned by ODEK Technologies, if you’ve received a suspicious email, text message or email involving BrightRock. You can also email us at helpdesk@odek.co.za with the details of any suspicious online activity that you’ve come across. Please be sure to include your contact details in the email. We’ll then contact you, investigate and keep you updated on what we find. ODEK Technologies is BrightRock’s ICT partner.
Learn more about how you can stay safe online.