Why do you need se­vere ill­ness cover?

Sunday Times - - Money -

● If you be­long to a med­i­cal scheme and you have taken out cover for dis­abil­ity, you may won­der why you also need se­vere ill­ness cover.

Your med­i­cal scheme should cover the cost of your treat­ment for se­vere ill­nesses, but it may have an­nual lim­its or may not cover the full cost of the spe­cial­ist treat­ment you pre­fer, says Henk Mein­t­jes, the head of risk prod­uct devel­op­ment at Lib­erty.

In ad­di­tion, you may in­cur costs ad­just­ing your life­style once you have a se­vere ill­ness.

Mein­t­jes says the pay­out from a se­vere ill­ness pol­icy can be used for any­thing from pay­ing for spe­cialised cancer treat­ments over­seas to hir­ing a helper at home.

A use of the pol­icy pay­out is for home care and as­sis­tive de­vices not cov­ered by a med­i­cal scheme, or for an au pair to take care of your chil­dren while you are in­ca­pac­i­tated.

Your dis­abil­ity cover will pay out if you are per­ma­nently un­able to work. A se­vere ill­ness may leave you tem­po­rar­ily un­able to work, but in the case of a cancer that you are likely to sur­vive, you will not qual­ify for a per­ma­nent dis­abil­ity pay­out.

If you have an in­come re­place­ment pol­icy that pays out on tem­po­rary dis­abil­ity you may re­ceive a monthly ben­e­fit while you re­cover, but check what in­come you are cov­ered for and the wait­ing pe­ri­ods. Also bear in mind that your fam­ily may now have ad­di­tional ex­penses.

The in­creas­ing preva­lence of se­vere ill­nesses means this cover can be costly.

Four con­di­tions — cancer, heart at­tacks, coro­nary artery by­pass graft and strokes — form the core of most poli­cies as these are the ill­nesses that cause in ex­cess of 80% of the claims, but be­yond this the life in­dus­try cov­ers a wide range of ill­nesses, Mein­t­jes says.

Plans that cover only cancer will be cheaper than those with com­pre­hen­sive cover.

Life com­pa­nies to­day of­fer cover for any­thing from 30 to more than 300 ill­nesses in ad­di­tion to the core four on se­vere ill­ness poli­cies. The breadth of cover be­yond the four main ill­nesses will also af­fect your pre­mi­ums. And if you have the mis­for­tune to con­tract a se­vere ill­ness that does not fall within a spe­cific def­i­ni­tion, com­pre­hen­sive poli­cies have a catch-all cat­e­gory.

Se­ri­ous phys­i­cal con­di­tions can then be as­sessed and a claim will be paid as long it meets the re­quired def­i­ni­tions there­un­der (typ­i­cally in­abil­ity to per­form ac­tiv­i­ties of daily liv­ing or a de­gree of im­pair­ment based on the Amer­i­can Med­i­cal As­so­ci­a­tion guide­lines), Mein­t­jes says.

Many se­vere ill­ness poli­cies pay out in tiers, de­pend­ing on the sever­ity of the ill­ness. If, for ex­am­ple, you are di­ag­nosed with stage 4 cancer, be­ing the most se­vere form of the dis­ease, you are likely to re­ceive a pay­out of 100% of the sum in­sured. But for a cancer with a lesser im­pact on your life­style, the pay­out may be any­thing from 5% to 75% of your cover amount.

And if you have a heart at­tack, your pay­out will be de­ter­mined by blood mark­ers and the level of dam­age done to the heart tis­sue.

If you have the so-called tiered ben­e­fit, you can be el­i­gi­ble for an­other pay­out should the ill­ness progress, re­sult­ing in a higher sever­ity. But if you are paid out a 100% ben­e­fit on first di­ag­no­sis, you will not be able to claim again for re­lated con­di­tions.

Com­pre­hen­sive poli­cies will pay out again if you suf­fer a claimable event that is un­re­lated to your first claim. For ex­am­ple, if you have had cancer and re­ceived a pay­out and a year later you have a heart at­tack, Lib­erty will pay out again up to 100% for that con­di­tion, Mein­tjies said.

How­ever, be aware that in­sur­ers do have slight dif­fer­ences in their def­i­ni­tions of an un­re­lated claim.

An­other fac­tor mak­ing a big dif­fer­ence to your cover is whether you have a stand-alone ben­e­fit or one that ac­cel­er­ates. Ac­cel­er­ated ben­e­fits are ef­fec­tively an early pay­out of your life cover and there­fore cheaper, but you need to be aware how they can re­duce other ben­e­fits.

Mo­men­tum’s head of mar­ket­ing for life in­sur­ance, Ge­orge Kolbe, says it is very im­por­tant to opt for com­pre­hen­sive crit­i­cal ill­ness cover but to also con­sider flex­i­bil­ity that al­lows early pay­outs. This is the fourth con­sec­u­tive year Mo­men­tum has seen an in­crease in the num­ber of claims for early stages of crit­i­cal ill­nesses. The pos­i­tive side of this, says Kolbe, is that it in­di­cates that pol­i­cy­hold­ers are con­sult­ing their doc­tors ear­lier, giv­ing them the high­est prob­a­bil­ity of a suc­cess­ful treat­ment at a lower cost.

Poli­cies pay out in tiers de­pend­ing on the sever­ity of the ill­ness

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