No one plans to fall ill, but future health challenges are a reality we all need to prepare for—both medically and financially. The rising cost of healthcare, coupled with longer life expectancy, means that being medically prepared is only half the battle. A sound financial plan should include a blend of healthcare products and risk protection mechanisms that ensure you and your dependants are not left financially vulnerable in the event of a serious illness or injury. While there’s no one-size-fits-all solution, the key lies in structuring a portfolio of complementary products suited to your individual circumstances, stage of life, and financial position.
Medical aid
What is it? Medical aid is a regulated financial product that provides cover for private healthcare services. All South African medical schemes must be registered under the Medical Schemes Act and are overseen by the Council for Medical Schemes. Medical schemes operate as not-for-profit entities where member contributions are pooled and managed according to pre-defined rules.
What does it cover? All schemes must cover Prescribed Minimum Benefits (PMBs), which include emergency conditions, 271 medical conditions, and 26 chronic illnesses. Depending on the plan option selected, cover may range from hospital-only benefits to comprehensive cover that includes day-to-day expenses. Network options are generally more affordable, while comprehensive plans may include additional cover for scopes, scans, pathology, and radiology. Some plans include a medical savings account for out-of-hospital costs. For those managing a chronic illness, upgrading to a plan that covers your condition in full may be a financially prudent decision.
Who needs it? Given the challenges within the state healthcare system, belonging to a medical scheme is highly advisable for anyone with an income. With a broad range of open schemes and plan options available, there is likely a product to suit most affordability levels.
Gap cover
What is it? Gap cover is short-term insurance that protects medical scheme members from shortfalls between the medical scheme rate and the actual rate charged by specialists during hospitalisation—often as much as five to six times the scheme tariff.
What does it cover? Gap cover has evolved to offer a wider range of benefits, including co-payment cover, internal prostheses, day clinic procedures, casualty unit visits, cancer-related costs, and additional out-of-hospital consultations. Although relatively inexpensive, these policies vary considerably, so a careful comparison of benefits and exclusions is essential.
Who needs it? If you’re on a medical aid, gap cover is highly recommended. Note that some policies impose age limits for new entrants, often 60 or 65, so consider securing cover earlier rather than later.
Dread disease cover
What is it? Also known as severe illness or critical illness cover, dread disease insurance pays out a tax-free lump sum on diagnosis of a listed serious illness. It is governed by the Long-term Insurance Act and is designed to help ease the financial strain that often accompanies a life-altering diagnosis.
What does it cover? Cover typically includes major conditions such as cancer, heart attack, stroke, and coronary artery bypass surgery. Most providers now offer extended cover for diseases such as multiple sclerosis, Parkinson’s disease, organ failure, paralysis, and loss of sight. Claim eligibility depends on both the diagnosis and the severity level as defined in the policy wording. The payout can be used at your discretion—for medical expenses not covered by medical aid, home modifications, specialised equipment, or to reduce debt.
Who needs it? Dread disease cover tends to be relatively expensive, so assess your need in light of other benefits you already have in place. If you already have comprehensive medical aid, gap cover, and income protection, dread disease cover may be considered a complementary rather than essential benefit.
Income protection cover
What is it? Income protection is long-term insurance that pays out a regular monthly income if you are unable to work due to temporary or permanent disability caused by illness or injury.
What does it cover? This form of cover is particularly important for professionals and self-employed individuals whose ability to earn an income underpins their financial security. Cover is typically underwritten, taking into account your health, occupation, and income level. Payouts continue until you recover, reach retirement age (usually 60 or 65), or die. As your income grows over time, it’s essential to review your policy to ensure that your cover remains sufficient.
Who needs it? If your monthly expenses and retirement savings depend on your income, this type of cover is essential. Dual-income families, those with additional income streams, or with a substantial net asset base may have reduced need, but should still weigh the risks carefully—particularly if they have high debt levels or dependants.
Lump sum disability cover
What is it?
This form of insurance pays out a lump sum in the event of permanent disability. It is designed to cover the once-off financial impact of disability, such as home modifications, settling of debts, or purchasing assistive equipment.
What does it cover?
Disability cover has become increasingly sophisticated. Most insurers offer two main structures: traditional disability insurance and functional impairment cover. Traditional disability cover pays out based on your inability to continue working in your own or any similar occupation, depending on your policy wording. Functional impairment, by contrast, pays out if you suffer a specific, listed impairment—regardless of whether you can still work. The impairment must be permanent and must affect your ability to perform everyday functions. The payout is typically tiered based on severity.
Who needs it?
This type of cover is best suited for those with high debt levels, dependants, or insufficient passive income streams. It should be viewed in conjunction with your income protection, dread disease, and overall financial plan.
When reviewing your healthcare and risk portfolio, the goal should not be to amass every available product, but to build a set of complementary solutions that work in harmony. For example, a well-structured combination of medical aid, gap cover, and income protection may reduce your need for extensive dread disease or lump-sum disability cover. Likewise, if you’re nearing financial independence or retirement, your need for income-based products may decline. A financial advisor can help assess your risk exposure, identify gaps, and recommend a suite of products tailored to your health risks, earning ability, and long-term goals.
Falling ill is stressful enough without the added burden of financial strain. While there is no perfect product that covers every possibility, a carefully curated combination of medical aid, gap cover, and long-term insurance benefits can provide robust protection against both the expected and the unforeseen. As your health risks evolve with age and your financial position changes, so too should your portfolio of healthcare and risk cover. By regularly reviewing your protection and seeking professional advice, you can give yourself—and your loved ones—the best chance of staying financially secure in the face of future ill-health.
Have a super day.
Sue
