What type of severe illness cover will suit you best?
Debates about the merits of full or partial payouts on severe illness policies have been rekindled by the introduction from next week of standard disclosures about payouts on these policies. Severe illness, dread disease or critical illness cover is intended to cover you against the cost of surviving a serious illness.
An income replacement policy will cover you when you are too ill to work. Your medical scheme should cover the bulk of your medical costs. Dread disease cover is intended for the additional costs, such as the loss of potential income because you may no longer be able to pursue your career, or the costs that arise from the need to adapt your home. These policies may also compensate you for your loss of insurability after a major illness.
The Association for Savings & Investment South Africa (Asisa) has set Tuesday, September 1, as the deadline for life assurers to disclose on all marketing material and on their websites the percentage of the sum assured they will pay out for four levels of severity of heart attacks, coronary artery bypass grafts, cancer and strokes. These illnesses account for 70 to 90 percent of all dread disease claims.
Once life assurers disclose on a standardised grid what they will pay out for each illness at each severity level, you will be better equipped to compare their policies, Asisa says, although the standardised definitions apply only to the definitions of the four major illnesses and ignore other features of the policies on offer.
But it is a matter for debate whether you should opt for a policy that pays out 100 percent of your sum assured regardless of the severity of the illness or one that pays out at a lower level and continues to offer you cover for related claims.
Life assurers fall into two camps: those that pay out in full regardless of how ill you are and those that offer what is known as tiered cover. Personal Finance canvassed the views of a life assurer from each camp.