Illustrative image: The 2025 Insurance Gap Study shows that the life and disability insurance gap widened 12.5% per year between the end of December 2021 and the end of December 2024. (Illustration: Freepik) 
The average South African household, supported by at least one income earner, would be forced to cut living expenses by more than a third if that person died or lost their job because of a disability, a study by the Association for Savings and Investment South Africa (Asisa) says.
The 2025 Insurance Gap Study, which has been released every three years since 2007, shows that the life and disability insurance gap widened 12.5% per year between the end of December 2021 and the end of December 2024, from R35.4-trillion to R50.4-trillion.
Read more: SA ‘is nowhere near’ closing the life and disability insurance gap
For context, says Besa Ruele, a member of the Asisa life and risk board committee, the country’s household insurance gap at the end of December 2024 was seven times bigger than South Africa’s GDP of R7.3-trillion in 2024.
Asisa defines the insurance gap as the difference between life and disability insurance cover in place and the amount required by households to maintain the same standard of living after the death or permanent disability of an income earner.
The insurance needs exclude immediate expenses such as funeral costs, medical costs and the cost of adapting a home and car for a disabled person.
According to actuarial statistics, about 440 income earners are expected to die every day in South Africa in 2025, and 145 are likely to become disabled. Although total life and disability cover increased 5% a year over the three years to 31 December 2024, the growth in new income earners combined with an increase in earnings outpaced the growth in cover, causing the significant widening of the insurance gap.
According to Statistics South Africa data, the number of formally employed income earners increased from 14.3 million at the end of December 2021 to 16.1 million at the end of December 2024.
The insurance gap per earner
The Asisa Insurance Gap Study shows that the average income earner would need life cover of at least R2.1-million to ensure that their family can continue living at the same standard should their income fall away due to death. However, the average income earner has cover of R800,000, leaving an insurance gap of R1.3-million.
Ruele explains that the average family would be left with two options when an income earner dies: drastically cutting household expenses by at least 34%, or finding a way to generate an additional monthly income of about R7,400.
She says the financial impact on families is even more dire when an income earner suffers a total disability, since the family size does not decrease. In fact, adds Ruele, a disabled person usually has more expensive needs since they are suddenly forced to stay at home and often require caregiving.
The study shows that the average family would need disability cover of R3-million to maintain their standard of living. However, since the average South African earner has disability cover of only R1.2-million, the gap per family is about R1.8-million.
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To close the gap, according to Ruele, the family of a disabled person would have to reduce household expenses by 37% or generate an additional monthly income of about R9,800.
Closing the gap
The gap is exacerbated by income inequality as higher earners have more coverage.
Ruele says it is much cheaper to close the death and disability insurance gap while the policyholder is still earning an income than to make up for lost income after the risk event. In the case of death cover, the cost would be an additional 5.2% of earnings. To increase disability cover would require spending an extra 3% of earnings.
Since income earners should aim to have adequate death and disability cover, the total cost of closing the gap would be 8.2% of earnings, according to Ruele.
WS Nel, actuarial manager at True South Actuaries, which carried out the research, noted that in terms of disability cover, the replacement ratio (how much money is needed) would be less than 100% of the income earner’s salary for three reasons.
“First, in the event of a death, there’s one less mouth to feed, so to speak, and so living expenses would decrease for the family,” he said.
“Second, insurance proceeds are not taxed, whereas the income that you’re currently earning is probably taxed if you are above the tax thresholds. And last, for the richer segment of the population, the current portion of their earnings might currently be used not to cover living expenses or to save for retirement, but used for wealth creation and, to that extent, that doesn’t have to be replaced by insurance.”
Ruele says: “Considering that salary increases this year are likely to be between 3% and 4%, if any, most income earners will not be in a position to channel 8% of their income towards risk cover.”
This is despite the fact that the PayInc Net Salary Index, which tracks the average nominal net salaries of about 2.1 million earners in South Africa, increased for the sixth consecutive month in September 2025. The steady increase aligns with a gradual improvement in economic activity.
In recent years, many wage agreements have been extended to three- or five-year terms, often resulting in higher pay levels in relation to today’s low-inflation environment.
“While adjusting to a lower-inflation environment will be challenging and takes time, recent data shows early signs of moderating inflation expectations and salary adjustments becoming more aligned with this trend,” says independent economist Elize Kruger.
Examples include the recent Motor Industry Bargaining Council’s three-year agreement granting employees in the component manufacturing sector a 6% increase in the first year from September 2025 to August 2026, followed by 5% in years two and three.
Read more: Ford’s retrenchments reflect broader challenges and uncertainty in SA’s automotive sector
In automotive retail, workers will receive 5% annual increases over three years, whereas in the fuel retail sector, forecourt attendants will see 6%, 5% and 4% increases across the three years, plus a 1% annual medical insurance allowance.
Cashiers in this sector will receive 6% in year one and 4% in years two and three – marking the first time in recent years that 4% has featured as an annual increase in collective bargaining.
The critical need for critical illness cover
Just more than 24,000 South African formally employed income earners are expected to be diagnosed with a critical illness such as cancer, a heart attack or stroke in 2025, according to actuarial estimates. Yet more than 85% of income earners do not have critical illness cover, says Nel.
What is critical illness cover?
Critical illness cover provides a lump-sum payout when someone suffers a serious health condition, such as cancer or heart disease, ensuring that a major illness does not cause financial hardship.“Critical illness cover provides liquidity during recovery from a serious illness to mitigate the financial impact of lifestyle adjustments, shortfalls in medical aid cover, or treatments not covered by medical aid,” Nel explains.
South Africa was the first country to introduce critical illness products in the 1980s after Dr Marius Barnard, the brother of heart transplant pioneer Dr Christiaan Barnard, convinced a small life insurer.
The 2025 Asisa Insurance Gap Study shows that whereas South Africa’s 16.1 million formally employed income earners generate about R4-trillion in annual gross earnings, their critical illness cover was worth only R1.1-trillion at the end of December 2024. Nel says this translates to a critical illness coverage ratio of 26% at the end of 2024.
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The Asisa findings tie in with observations of several life insurers in recent months as they released their claims statistics for 2024.
Liberty, for example, said its “life protection” payouts increased 9.5% to R5.5-billion last year. Lifestyle protection increased 20.4% to R1.2-billion, income protection lump-sum payouts rose 18.5% to R507-million and monthly income protection payouts were up 11.6% to R267.3-million.
“While life claims made up the bulk of payments, the dramatic increase in claims from lifestyle protection benefits demonstrates that people are living longer with critical illnesses,” said Mark Barberini, head of comprehensive life solutions at Liberty.
Cancer (31.2%), cardiovascular disorders (22.3%), respiratory disorders (5.8%), musculoskeletal disorders (5.5%) and nervous system disorders (5.3%) were the top five claim causes. Although cancer was the leading claim for both sexes, 37.2% of women claimants claimed for cancer, compared with 27.9% of men.
“The higher prevalence of cancer among women can possibly be attributed to the high incidence of breast cancer among South African women. Notably, 46.9% of cancer-related claims submitted by women were for this specific form of the disease. For men, the most common cancer was prostate cancer, accounting for 31.9% of male cancer claims,” Liberty’s chief medical officer, Dr Reinhardt Erasmus, said.
Rhoderic Nel, Sanlam’s risk and savings chief executive, said: “About 24% of all living benefit claims are from clients younger than 35. It’s a sobering reminder that life-changing illness can strike at any age.” DM
This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.
