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Retrenchment Cover

Retrenchment Cover Information Only


If you are South African, you will have heard of retrenchment. In recent months, there was a huge spike in retrenchments around the country. We have seen some of the biggest firms in SA lay off staff left, tight and centre. Luckily, the insurance market responded with an income protection product. Retrenchment Cover is a way to safeguard your income.

A major fear of the employed is job loss. This event can threaten your financial security. Retrenchment is often unexpected and unavoidable. The best way to prepare is to ensure you limit the risk. Being prepared is the responsible thing to do.

In February 2014, retrenchment was at a ten-year high. The South African economy is far from where it should be. With all the labour unrest, the economy is struggling. With a fragile economy come many worries. Retrenchment can come knocking on your door. It does not matter what your job or industry is. Recently major companies downsized even top management.

Why do People Get Retrenched?

Retrenchment can happen to any person with employment. It is part of the business. There are a host or reasons why companies must retrench. It can happen to companies that seem profitable. There are often economic reasons why this can happen. Below we have mentioned just a few examples of what can cause retrenchment in SA.

1. Expiry of Contracts
2. Investor Pressure
3. Redundancy of Staff Member
4. Bankruptcy of Company
5. Mismanagement
6. Strikes & Labour Unrest

What is Retrenchment Cover?

In short, it is a loss of income protection product. It pays out the insured amount if the policyholder is involuntarily retrenched. This kind of policy will usually pay out up to 6 months. It will help the policyholder get back on their feet. It offers financial assistance when it is needed the most. Read More

Have you ever thought of how you will pay your bills if you suddenly lost your income?

Most South Africans have some debt. You need to consider your mortgage, debt and even financial dependents. Receiving money for six months after your job loss can help you focus. If you do not have to worry about money, you can focus on finding a new job. There is enough stress in finding employment. Money should not add to the problem.

Why Do I Need Retrenchment Cover?

There are many reasons why you need a retrenchment plan. Firstly, you must be able to pay your bills. Most debtors will not allow special arrangements for more than a couple of months. Falling behind on your debt can have a long-term negative effect. We all know how important a person’s credit record is. The last thing you want is a bad credit score because of the unforeseen.

There are many single income breadwinners in SA. If you have people that depend on you financially, it can be very stressful. Knowing that you have some form of protection helps relief the stress a bit. At least you know that you will be able to provide for up to six months after your claim. Read More

Examples of Retrenchment Cover Benefits:

  • The maximum cover amount available is R150 000 (6 months)
  • You can usually claim multiple times
  • Your payout will be in a lump sum
  • It is available as an ancillary benefit
  • No medical underwriting is necessary

Who can Get Retrenchment Cover?

Firstly, you need to have employment. Most policies will not cover you if you are self-employed or part of your family business. It is due to the fragile nature of business. The insurance companies cannot afford the risk. You must have been employed on a permanent basis for at least two years continuously. At least one of the years must be with the employer that retrenched you.

The requirements are purely to prevent people claiming after they have been in temporary employment. Contracts come and go; it is no use you are employed for a 3-month period before you claim. It means that the product will not be viable.

What is Not Covered?

Not all income loss is due to retrenchment. Some situations will not fall under this category. Below are some examples of what will not be covered. It is just a brief overview of examples of what will not qualify.

• Voluntary Retrenchment
• Expiry of a Temporary Contract
• Dismissal
• Pregnancy, Abortion or Childbirth, etc.


Retrenchment is a risk everybody faces. Getting an insurance policy against this risk can be very smart. You can safeguard your income while you seek a new job. You can rest assured, if you are laid off, you will have temporary income.

This policy does not cost an arm and a leg. We think it is a small price to [pay for the peace of mind.

July 8, 2021

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