‘Full pay­out may be needed even if the ill­ness is mild’

Weekend Argus (Saturday Edition) - - PERSONAL FINANCE -

Most of the claims pol­i­cy­hold­ers make on se­vere ill­ness poli­cies are for the milder forms of one of the four main ill­nesses, Old Mu­tual says.

Old Mu­tual is one of the life as­sur­ers that pays out the full in­sured amount for valid claims on its dread dis­ease poli­cies re­gard­less of the sever­ity of your ill­ness.

Many pol­i­cy­hold­ers are choos­ing poli­cies that pay out less than the full in­sured amount for a less se­vere level of an ill­ness – 25 or 50 per­cent of the in­sured amount – be­cause th­ese poli­cies are marginally cheaper than those that pay out in full, the com­pany says. But Old Mu­tual ar­gues that this cheaper cover may not be suf­fi­cient for your needs.

MOST CLAIMS AT LOW LEV­ELS

Dr Peter Bond, the life as­surer’s chief med­i­cal of­fi­cer, says Old Mu­tual’s claims data show that most of its pol­i­cy­hold­ers are claim­ing for ill­nesses at lower sever­ity lev­els.

Can­cer ac­counts for 48 per­cent of all claims on Old Mu­tual’s se­vere ill­ness poli­cies, and 60 per­cent of all can­cer claims are for stage one can­cer, which, in terms of the stan­dard­ised se­vere ill­ness def­i­ni­tions, is classified as the low­est sever­ity level, D. Heart at­tacks ac­count for 25 per­cent of all Old Mu­tual’s se­vere ill­ness pol­icy claims and 50 per­cent of th­ese are de­fined as mild or mi­nor (level C or D).

Strokes ac­count for eight per­cent of claims and 40 per­cent of th­ese re­sult in mild mo­tor dam­age, Old Mu­tual’s statis­tics show.

Bond says it is likely that claims for mild episodes of a se­vere ill­ness will con­tinue to in­crease rel­a­tive to claims for more se­ri­ous ill­nesses, be­cause meth­ods for de­tect­ing se­ri­ous ill­nesses are im­prov­ing and be­com­ing more read­ily avail­able, and more peo­ple are tak­ing pre­cau­tions against more se­ri­ous oc­cur­rences of se­vere ill­nesses.

HUGE IM­PACT ON YOUR LIFE

Ur­sula Torr, Old Mu­tual’s risk so­lu­tions prod­uct man­ager, says Old Mu­tual be­lieves that even at “mild” sever­ity lev­els, an ill­ness can have a huge im­pact on your life­style. Al­though you may be able to work there­after, se­vere ill­ness ben­e­fits are not linked to your abil­ity to work but your abil­ity to cope with work.

Bond says at lower sever­ity lev­els a dread dis­ease or crit­i­cal ill­ness may have sim­i­lar or greater cost im­pli­ca­tions than a more se­vere form of the same ill­ness.

The fact that a se­vere ill­ness can be cured, he says, should not de­ter­mine the level of the ben­e­fit pay­ment on a se­vere ill­ness pol­icy.

Usu­ally, Bond says, mild ill­nesses re­quire ma­jor treat­ment – for ex­am­ple, ag­gres­sive treat­ment of early stage can­cer – which can re­sult in a ma­jor up­heaval to your life­style. He says this ag­gres­sive treat­ment can have a big im­pact on your life and may in­volve a num­ber of ex­penses. A par­tial pay­out on your se­vere ill­ness pol­icy may there­fore be in­suf­fi­cient to meet the ex­penses.

At an early stage of an ill­ness such as can­cer, your doc­tors will try to cure you, but at the most ad­vanced stage of the dis­ease, you are likely to re­ceive less treat­ment for the ill­ness and more pal­lia­tive care and treat­ment to al­le­vi­ate the symp­toms, Bond says.

Sim­i­larly, you may suf­fer a mild stroke that is re­garded as only sever­ity level D. But, Bond says, strokes have dif­fer­ent ef­fects on peo­ple, and you could suf­fer a level D stroke that af­fects your mem­ory and hence your abil­ity to work and per­form daily tasks.

Apart from the way in which a milder form of a se­vere ill­ness may af­fect you phys­i­cally, you may also strug­gle with your ill­ness emo­tion­ally, Bond says. Old Mu­tual statis­tics show that 45 per­cent of heart at­tack pa­tients and 25 per­cent of all can­cer pa­tients suf­fer from de­pres­sion.

As medicine pro­gresses, your chances of sur­viv­ing a se­vere ill­ness, one of the big four in par­tic­u­lar, are high, and there is a good chance you will be alive five years af­ter con­tract­ing that ill­ness.

But your great­est need will be for the fi­nan­cial means to pro­vide for post-event ser­vices, such as re­ha­bil­i­ta­tion and the re­design of your home and work­place, and for the po­ten­tial loss of in­come, Torr says.

A pol­icy that pays out 100 per­cent of the sum in­sured, such as those of­fered in Old Mu­tual’s Green­light range, can be re­in­stated if you con­tinue to pay the pre­mi­ums and this al­lows you to claim for a sec­ond un­re­lated ill­ness.

IN­SUR­A­BIL­ITY

Dr Pi­eter Coet­zer, San­lam’s chief med­i­cal ad­viser, adds that where you take out se­vere ill­ness cover to pro­tect your­self against a loss of in­sur­a­bil­ity, it makes more sense to get a 100per­cent pay­out and in­vest it to use for your other needs.

He says you are un­likely to get risk cover within the first five years of suf­fer­ing from one of the main dread dis­eases of stroke, can­cer and heart dis­ease.

If you then need col­lat­eral in­sur­ance as se­cu­rity for a loan, you won’t be able to get a pol­icy as col­lat­eral. If you had a pol­icy that paid out a 100-per­cent ben­e­fit you could in­vest any sur­plus money to use for this kind of need, Coet­zer says, but a tiered ben­e­fit would not of­fer the same kind of ac­cess to sur­plus funds.

Coet­zer says that claim­ing on a pol­icy can be la­bo­ri­ous and it is not al­ways cer­tain that you will be paid out. You may pre­fer to have to go through this process only once rather than a num­ber of times with a tiered ben­e­fit prod­uct.

He also points out that al­though the stan­dard­ised def­i­ni­tions will help you to com­pare the pay­outs on the four main dread dis­eases, there could be many dif­fer­ences be­tween the other con­di­tions cov­ered.

In ad­di­tion, he says, tiered prod­ucts some­times have time frames for pay­outs. For ex­am­ple, a stage one can­cer may only be up­graded to a stage two can­cer if it spreads within six months.

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