All about dis­abil­ity in­sur­ance

Your life could change in an in­stant – it helps to be ready

YOU (South Africa) - - CONTENTS - By LETI­TIA WAT­SON Send sug­ges­tions for top­ics and re­quests for info to your­money@you.co.za. We may an­swer your ques­tions in this col­umn but won’t re­ply per­son­ally. * EX­AM­PLE FOR IL­LUS­TRA­TION PUR­POSES ONLY

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.

1

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.

2

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.

3

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.*

4

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.

5

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.

6

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.

7

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.

8

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.

9

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.

10

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.

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