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How much dread disease cover?

Posted  November 8, 2016

The right dread disease cover can help mitigate the financial blow of a severe illness. But how much cover do you need to overcome serious illnesses?

It is no secret that private healthcare costs in South Africa are soaring – they’ve increased by 300% in the past decade, according to Health Minister Aaron Motsoaledi. Research by The World Health Organisation (WHO) and the Organisation for Economic Co-operation and Development (OECD) found that when compared with 20 European countries, South Africa’s private hospital prices were ranked “the least affordable”.

Even if you’re on a good medical aid, it’s unlikely to cover the full medical costs of a severe illness or injury. There’s a good chance that you’ll be facing serious out-of-pocket expenses at a time when you may also be out of action, and not earning.

Adequate dread disease cover can significantly reduce the financial risk you face in such a scenario. Dread disease cover, also known as chronic illness cover, is an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy. These illnesses include but are not limited to the so-called ‘big four’ dread diseases, which are: cancer, coronary artery bypass, heart attack and stroke. These four dread diseases account for up to 90% of all dread disease claims both in South Africa and internationally.

The choice of cover is an important one – should you need it, dread disease cover will provide the funds you need to cover medical expenses and treatments not covered by your medical aid and replace some of the income you might lose if you are forced to take time off work.

Because of the complexity of the decision, and the cost implications, it’s advisable to talk to a financial advisor. As always, it pays to do your homework, and select a reputable insurer. And be sure that you know exactly what the benefits are. Don’t just go for a cheap option – look for the most comprehensive cover.

Factors your financial planner will considerYour financial planner will conduct a full financial needs analysis to help you work out how much dread disease cover you need to manage the cost of serious illnesses. He or she will take the following factors into consideration:

  • Age
  • Dependants
  • How much you have saved in an emergency fund
  • Whether you are the primary breadwinner
  • What you earn
  • What your partner earns
  • Your health
  • Whether you smoke
  • Your family history of dread diseases
  • What you can afford
  • How much medical aid cover you have
  • If you have gap cover

What you can expect to pay Wondering what peace of mind would cost you? Here are some examples:

Example A:
Female non-smoker, 35
Dread disease cover of R500 000
Monthly premium: R217

Example B:
Male smoker, 35
Dread disease cover of R500 000
Monthly premium: R252

* Examples are for illustrative purposes only. Actual costs may vary.

Questions to ask before you buy! It is important to note that every insurance company structures their disability and dread disease cover policies differently in terms of benefits, exclusions, conditions and illnesses covered, payouts etc. Make sure that you fully understand a policy before you buy it and be sure to read all your policy documentation carefully. You should ask your planner or insurer the following questions:

Is there a waiting period?
There are potentially three waiting periods. The first waiting period is the period of time that must pass before your cover comes into effect. During this time you are unable to claim. Then there is the ‘survival period’, the length of time a policyholder has to wait after being diagnosed with an illness before a claim is paid out. Finally, the claims process can take time based on the nature of the policy, the reason for the claim, the need for medical tests to confirm diagnosis, and the wait for medical test results. This can delay a pay-out.

Will my policy cover all illnesses?
Ask your provider or planner what illnesses or conditions are not covered by the policy.

In what circumstances might my claim be rejected?
Non-disclosure of relevant information, whether deliberate or accidental, is the usual cause of rejected or reduced claims.

Will I be paid out the full sum on diagnosis?
Some policies pay out the full assured amount on diagnosis of a dread disease; others pay out a percentage of the amount, depending on the severity of your illness.

How much can I expect premiums to increase by?
In general, this should increase in line with inflation or you will have the option when taking out your policy to select your premium and and/or benefits escalation.

Dread disease cover can be a real life-saver. Because of the complexity of the decision, and the cost implications, it’s advisable to talk to a financial advisor, do your homework, and select a reputable insurer. Don’t just go for a cheap option – look for the most comprehensive cover. As always, be sure that you know exactly what the benefits are.

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