Severe illness cover

Each year, about a million people need to stop working due to an illness or a debilitating injury. Yet, according to an article published in The Times, only 10% of people have severe illness cover.

A severe illness is a medical condition that prevents you from leading your normal life, and the life industry covers a wide range of these dreaded diseases and health conditions, from Type 1 diabetes to Parkinson’s disease. However, the ‘Big Four’ — a heart attack, a stroke, cancer or a coronary artery bypass graft — form the core of most policies, as these form over 80% of claims.

A severe illness usually requires regular visits to specialists, treatment, medication, and potential lifestyle adjustments. However, it is possible to survive a severe illness with the right medical treatment and support.

Why is severe illness cover necessary?

A severe illness typically has three phases: 1. Diagnosis; 2. Treatment; 3. Recovery. Your medical aid and gap cover should be able support you through most of the basics of the first two phases, but severe illness cover is designed to support you through your recovery period, which can be expensive and is when you are likely to feel the financial impact of costs that you might not have initially considered.

While your medical aid and gap cover may pay for the direct costs of a severe illness, such as hospitalisation and basic treatment, there may be annual limits. It will also probably not cover specialised treatments, alternative therapies, and rehabilitation; or indirect expenses that arise to meet necessary lifestyle changes, such as taking time off work to recover, making home and vehicle adjustments, or hiring an au pair to look after your children.

Around half of people who survive a severe illness also suffer some form of depression, but one of the most commonly overlooked expenses is the treatment of depression, which can last weeks or years.

Disability cover vs. severe illness cover

If you have already sensibly taken out disability cover, you may think that severe illness cover is superfluous to your needs. However, you would be wrong. While basic disability cover is an important precaution that will protect you in the event of being permanently unable to work, it may not pay out if you are temporarily unable to work due to a severe illness that isn’t terminal.

Many employers in South Africa will pay 30 days of sick leave over a three-year period, but your monthly income will likely be reduced when you have used all of your entitlement. While disability cover will come into play if your income needs to be replaced on a long-term basis, severe illness cover will pay out a tax-free lump sum that you can use to replace any lost income for a short period.

A severe illness policy should also be able to cover anything from overseas treatment, to assistive devices and a home helper. The tax-free lump sum payout can be used immediately in whatever way you choose, so that you can have the best possible treatment and recovery plan, without having to dip into your investments or savings.

The options

Many severe illness policies pay out in tiers in accordance with the severity of an illness. So, for example, if you are diagnosed with stage 4 cancer, which is the most severe form of the disease, you will likely receive a payout of 100% of the sum insured. However, if you are diagnosed with a cancer that has less of an impact on your lifestyle, you may receive a payout of up to 75% of your cover amount. Likewise, if you have a heart attack, your payout will be determined by blood markers and the level of damage to the heart tissue.

If you have this ‘tiered benefit’, you can receive another payout if the illness progresses and becomes more severe. However, if you receive a 100% payout when you are first diagnosed, you cannot claim again for related conditions. If you have a comprehensive policy, you can receive benefits if you suffer a claimable illness that has nothing to do with your first claim. For example, if you once received a payout for a stroke then are diagnosed with cancer years later, you can also receive up to 100% of the sum insured for the second condition. Just do be sure to enquire beforehand as to your insurer’s definition of an unrelated claim, as this can differ between providers.

Whether you choose a stand-alone benefit, or one that accelerates, can also make a big difference to the cover you receive. Accelerated benefits may be cheaper, as they essentially are an early payout of your life cover, but they can also reduce other benefits.

In recent years, there has been an increase in the number of claims for the early stages of severe illnesses, which shows that policyholders are consulting their doctors earlier, thereby greatly improving their chances of successful treatment at a lower cost. Given that it is better to vigilant about your health and seek advice and treatment as soon as possible before a disease progresses, it is very important to opt for comprehensive severe illness cover that allows the flexibility of early payouts.

A comprehensive policy should have a catch-all category that will cover you if you contract a severe illness that does not fall within a specific definition.

If there’s a history of a severe illness in your family, it is advisable to have regular medical check-ups so that you can be diagnosed early if you are affected. An early diagnosis, along with comprehensive severe illness cover, can maximise your chances of recovery. If you have already had a severe illness, you may still be eligible for cover but, depending on the type of severe illness suffered and your age at the time, there may be restrictions, such as exclusion of specific illnesses.

A monthly contribution to a severe illness benefit can significantly ease any recovery or even save your life. Nowadays, over 300 illnesses are covered on some severe illness policies, but the breadth of cover beyond the core four illnesses may affect your premiums. Don’t hesitate to arrange a meeting to discuss the range of options and benefits available.

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