Being retrenched is one of the most traumatic transitions a person can go through in their career, and as the world grapples with the aftermath of the pandemic and strained economies, retrenchments are unfortunately still a reality for many people.
The shock of being retrenched, coupled with the financial stress, may leave a person uncertain about how to proceed. Sadly, consumers who do not have retrenchment cover are exposed to greater financial risk when they’re cut back.
Typically, retrenchment insurance pays up to 70% of your taxable salary (depending on your tax bracket) for up to six months. The idea is that the monthly retrenchment insurance payments will allow you to meet your financial commitments until you find a new source of income, such as finding another job or starting a business.
When they are retrenched, people can easily find themselves defaulting on payments. This can result in impaired credit records. However, if basic money management principles are followed, this situation can be avoided.
Below are some tips to consider to ensure that you have some financial buffer in place should you be impacted by retrenchment:
Most options have a 6-month waiting period and pay up to R30 000 per month if you are retrenched. However, it is critical to research your options and weigh up the various benefits.
A good financial adviser will advise you on the best vehicle to house these funds while you make plans for future employment or business opportunities.
Do not cancel your medical aid. If your employer has been paying your medical aid premiums on your behalf, give your medical aid debit order instructions to ensure that there is no lapse in coverage and that nothing falls through the cracks during this trying time.
Credit life policies are often included with home loans, car loans, and other credit agreements, and cover what you owe the credit provider if you cannot meet your repayments because of disability or death. For example, if you pass away while owing an amount on your car loan, this type of policy will settle the debt, leaving your estate free of that liability.
Many credit life policies include a retrenchment benefit, so that if you are retrenched, the debt covered by the policy will be settled.
Customers with policies taken out before the implementation of the NCA Credit Life Regulation, which is restricted to retrenchment cover, are able to claim where they have not been retrenched but are unable to earn an income for various reasons.
WRITTEN BY LEE BROMFIELD
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)