Lump-sum disability cover needed to fund future living costs and lost earnings.
Additional cover needed
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Capital needed
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After-tax income
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Your breakdown
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The risk people insure last and need most
Most South Africans insure their car and their house long before they insure their ability to earn, yet a permanent disability is financially worse than death for a household, because the bills keep coming while a new cost, care, is added. This calculator estimates the lump sum you would need if illness or injury permanently stopped your earnings: enough capital, invested sensibly, to replace your after-tax income and cover ongoing care for the rest of your working life. It is built for working people sizing up disability cover, whether as part of a group scheme at work or a standalone policy. The headline it gives is the gap, the cover you still need after counting what you already have.
The income tax it uses to convert your gross salary into the after-tax amount that actually needs replacing runs on the individual scale, at rates this calculator applies and worth confirming with SARS. The rest of the maths is financial, not tax, and rests on one idea that trips people up: discounting.
Why a lump sum is smaller than the years it covers
If you lose R400,000 of after-tax income every year for 25 years, the naive answer is that you need 25 times R400,000. That is wrong, and it overshoots badly, because a lump sum paid today is invested and earns a return while you draw from it. The right tool is the present value of an annuity: it asks how much capital today, growing at your expected net return, would fund that yearly shortfall for the full period. The higher the return you assume, the less capital you need, because the money works harder. This tool uses a net return entered after inflation, which keeps the answer in today's buying power.
Take someone earning R420,000 a year, 25 years from retirement, with R60,000 a year of medical and care costs, R1,000,000 of existing cover, and a 4 percent real net return. Using the rates this calculator applies for tax, the steps are these.
The R404,528 yearly shortfall over 25 years would naively suggest more than R10 million, but discounting at 4 percent brings the capital down to about R6.32 million. After the existing R1 million, the gap to fill is roughly R5.32 million. The chart contrasts the naive sum with the discounted capital.
Lump sum, monthly income, and the tax angle
This tool sizes a lump-sum benefit, which is one of two common shapes of disability cover. The other is income protection, which pays a monthly amount instead of a single payout. The two are taxed differently and serve different purposes: a lump sum is flexible capital you manage yourself, while income protection replaces a salary stream and is simpler to budget against. A practical judgement is to use both, a lump sum for the immediate costs of adapting your life, such as a wheelchair-accessible home, and income protection for the long monthly grind. One common mistake is double-counting cover you already hold through a pension fund or employer group scheme; enter that under existing cover so the gap is honest. Confirm the tax treatment of any policy and the prevailing income tax rates with SARS, because how the benefit is taxed changes how much you truly need.
What net return should I assume?
Because the field is a real return after inflation, a conservative figure of around 3 to 5 percent is common for a payout that must last decades and be drawn down safely. A higher assumed return lowers the capital the tool calculates, so erring low builds in a margin of safety. The default of 4 percent in this example is deliberately cautious rather than optimistic.
Should I insure my gross or after-tax income?
After-tax, which is what this tool replaces, because tax on your salary stops mattering once that salary stops. Replacing gross income would over-insure you and cost more in premiums than you need. The calculator strips PAYE using the individual scale at the rates this calculator applies, leaving the take-home figure that actually funds your life.
Why subtract existing cover?
So you only buy the shortfall. Many people already hold disability cover through an employer group scheme or a retirement fund without realising it. Entering that amount under existing cover nets it off the capital needed, so the result is the additional cover to arrange rather than the total, which avoids paying twice for the same protection.