Dread disease cover: A truly living benefit

Being diagnosed with a dread disease or severe illness is a life-changing event and can have a serious impact on the quality of your life. Severe illness is not selective and can affect anyone, although factors such as age, gender, lifestyle and family history can contribute to your chances. Statistics reveal that you are far more likely to contract a dread disease than die prematurely or become disabled, making severe illness a reality for many of us. When considering severe illness cover as part of your financial portfolio, a good starting point is to ask what your finances would look like if you were diagnosed with a dread disease.

What is dread disease cover?

Dread disease cover is an insurance benefit that offers a lump sum, tax-free payment in the event that you are diagnosed with a severe illness. Most dread disease benefits cover cancer, stroke, heart attacks and coronary artery bypass graft surgery – with these four illnesses accounting for between 70% and 90% of all claims. However, cancer remains the leading cause of dread disease claims, with cancers and tumours accounting for around 30% of all severe illness claims. According to the 2014 National Cancer Registry, breast cancer is the most common cancer in women of all races, with a lifetime risk of 1 in 27 in South Africa. Most insurers offer dread disease cover as either a standalone benefit or a supplementary benefit to your life cover. As a standalone benefit it is particularly attractive to those people who do not want nor require life cover. Most insurers also provide the option of purchasing dread disease as term cover which ceases at age 65 or as whole-of-life cover that continues for the duration of your life as long as the premiums are being paid.

How much does dread disease cover cost?

Dread disease cover can be expensive, although the cost of the cover depends on each individual’s personal health circumstances. Generally speaking, the younger you are when you take out the cover, the lower your premiums are likely to be. Your premiums will also be affected by the extent to which your benefits escalate each year. Our advice is to ensure that your cover keeps pace with annual inflation so that it does not lose value over time. If affordability is an issue, you may choose to implement a nominal level of cover and increase it steadily over time until you reach a level that you are comfortable with. When applying for dread disease cover, ensure full disclosure on the application form and don’t leave anything out, no matter how insignificant it may seem to you.

Do I need dread disease cover?

Although often not considered an essential benefit, dread disease cover can be considered a complementary benefit that stands alongside your medical aid and gap cover to provide additional financial assistance in the event of major illness. Bear in mind that medical schemes are designed to cover the direct medical costs relating to your illness such as hospital costs, doctors’ bills and medicines. Medical aid provides no benefits in respect of the non-medical costs associated with a severe illness, for example the costs of a wig for a cancer patient or vehicle modification costs in respect of a person with Motor Neuron Disease.

What conditions does it cover?

Navigating the labyrinth of dread disease cover can be a minefield. All insurers offer slightly different variations of cover making it difficult to compare apples with apples. Some insurers differentiate their offering by including over 300 illnesses or conditions, while others include intricate methods of calculating disease severity for claims-paying purposes. Some insurers offer more comprehensive cover for certain conditions, e.g. cancer, but may have a more limited list of diseases that they cover. Most independent financial advisers will have software that they can use to generate meaningful cost and benefit comparisons which will narrow down your choices and make selection easier. Before choosing an insurer, it is essential to do your research and speak to an independent advisor who can assist you with choosing the most appropriate cover.

How does the claims process work?

Old-style dread disease policies provided a lump sum pay-out on the diagnosis of a limited number of listed events or conditions. However, products have changed over time and, with advances in medical diagnosis and the discovery of new illnesses which could be categorised as severe, most insurers now offer a percentage-based pay-out depending on the severity of the disease. These products often allow for multiple claims as and when the disease or condition worsens. As dread disease cover often has a partial benefit payment system which is linked to the severity of your illness, you will not necessarily be paid out 100% of your cover when you claim. If the illness or diagnosis does not directly match an insurer’s claims criteria, they may perform an assessment referred to as ‘activities of daily living’, which is an internationally recognised system for determining the impact of a condition on the insured’s life to assess a level of payment for the illness. Therefore, upon diagnosis and claiming, the level at which you will be paid out will be directly linked to the severity or stage of your illness.

Are their exclusions that apply?

Every insurer has their own defined list of exclusions and waiting periods, and it is important to read the fine print before taking out the cover. In general, alcohol and drug abuse are excluded from such cover, as is HIV and AIDS-related illnesses. Self-inflicted injuries and attempted suicides are also generally excluded from cover. Some insurers can impose waiting periods in respect of condition-specific claims involving, for instance, back impairments or mental health conditions. It is also important to find out whether your policy includes a survival period for a dread disease claim, for example a 14-day survival period. If you suffer from a heart attack and pass away seven days later, the policy would not pay out as your death occurred within the 14-day period.

What can I use the pay-out for?

Once you receive your pay-out, you are free to use the money as you choose. A lump sum pay-out can provide a financial lifeline to a family who is facing mounting healthcare costs as a result of a severe illness. The funds can be used to cover the costs of new treatments and technology that are not yet covered by medical schemes. The money can also be used to assist with the costs of special dietary requirements, alternative treatments and therapies, travel costs, home care and private nursing. Other expenses may include wigs, vehicle and home modifications, specialised wheelchairs and custom-made prosthetics.

Advances in medical science means that we are living longer with our diseases rather than dying from them. Rather than asking ‘will I survive?’, we now find ourselves asking ‘will I survive financially?’.

Have a great day!


Leave a Reply

Let's talk

For a free consultation with no obligations, please fill in your details and we will contact you to set up a meeting.