All about disability insurance
Your life could change in an instant – it helps to be ready
THE purpose of disability cover is to insure you against expenses and a possible future loss of income if a disability means you can’t work anymore. The cover can be confusing. Here are guidelines to understand how it works and help you to choose the right disability policy for you.
Types of policies There are basically three types: those that pay monthly benefits as long as you’re unable to work; those that pay a once-off amount; and policies that are a combination of the first two, paying out monthly benefits for certain conditions and once-off amounts for others.
Decide which policy you think is best for you. A financial adviser can help to calculate how much cover you need and what you can afford and suggest policies from various service providers to choose from. Advisers can explain how the policies work.
If you’re still unsure, your policy document should describe exactly what you’re covered for, the prerequisites and exclusions, and how payouts work.
Understanding impairment and disability Insurers distinguish between impairment and disability. It helps to know what they mean so you can understand your policy, as payouts often depend on the degree of impairment or disability.
A disability leaves you unable to do your specific job and earn an income, while an impairment is a physical or functional disorder that doesn’t affect your ability to keep working, explains Ryan Chegwidden of Hollard Life. An example of impairment may be losing a leg.
Disability benefits aim to compensate for the future loss of income that comes with being unable to do your specific job, while impairment benefits provide cover for the unexpected expenses that come with an impairment.
Premiums These depend on several factors, such as the policy holder’s age, profession, health and smoking status, the amount of cover and the payout they’d like to receive. The more comprehensive the cover, the higher the premium.
Chegwidden gives this example: a 30-year-old, nonsmoking woman who’s an accountant takes out R2 million cover to be paid out as a once-off amount. Her monthly premium for core impairment will be R168,02. If she opts for comprehensive disability cover, the monthly premium will be R227,86.*
Your job If you’re a full-time employee, you might already have disability cover through your employer. Find out whether you have it and how much cover it is, then check with your adviser if it’s enough.
Exclusions Existing conditions that are a high risk of causing disability in future – such as psychiatric or back problems – are usually excluded from cover. But if you develop the condition later in life after you’ve bought the policy, you’ll be covered.
If the disability is the result of taking part in terrorism, purposeful illegal activity or self-inflicted wounds, claims will probably be rejected. This is also true for dangerous sports or professions.
Age restrictions A disability policy will usually pay out claims until the age of 65 or 70, but Chegwidden says there are new policies that will pay out claims for the duration of your life.
Waiting period A waiting period of between three and six months might be applicable before a claim is paid out. Premiums still have to be paid during the waiting period. But there are many companies that don’t have waiting periods and claims will be paid out as soon as the disability is confirmed.
General reasons to claim Musculoskeletal conditions such as arthritis, chronic backache or abnormalities in the spine or joints are some of the most common reasons to claim.
Many disability claims also sprout from car accidents. The highest risk for this is men younger than 30, followed by men between 42 and 50 years old, Chegwidden says.
Tax concessions There are tax concessions for people with disabilities and certain expenses relating to the disability – such as modifying your home or buying a wheelchair – are tax deductible. To find out more, go to sars.gov. za and look under Individuals/Tax during all life stages and events/ Tax and disability.
Disability grants If you have a physical or mental disability rendering you unable to work for a period longer than six months, you can apply for a government disability grant. There are certain prerequisites if you’re still able to earn an income.