Cover for dreaded disease also helps stop holes

Henry

I usually start this column with some spiciness – about cadre sadness, or something along those lines. Not this week, because the subject is heavy.

If you ask the average person what their biggest fear is, I’ll bet you that they will repeat three answers: their own death, the death of a loved one, or that a serious illness, something like cancer, will strike them or their loved ones.

Statistically speaking, your chances of dying are one to one. We are all going to lie in the dust one day, come what may.

I don’t want to scare you, but serious illnesses are a reality and also a big risk. For example: One in four South Africans know someone who has been diagnosed with cancer. And: There are about 130 heart attacks in Mzansi every day. (I will go into more detail below about what dreaded diseases entail.)

The point is, if something like this happens to you, it’s a bummer. Let’s make this very clear: money is not going to solve your problems. But one of the big stress points after something like this is, unfortunately, finances, because treatment is not cheap. Yes, your medical and your gap cover will plug an awful lot of holes, but something always leaks.

And that’s where this comes in.

I probably already sound like a stuck record, but go see your financial advisor. This is just overview, and this stuff can get quite technical.

What is dreaded illness cover?

This type of cover has several names: In English: dreaded disease, severe illness, critical illness. And in Afrikaans: dreaded illness, serious illness, critical illness and so on.

Essentially it remains the same, but of course there are things to consider.

For the purposes of this column, I’m just going to call it dreaded disease. It’s a form of long-term insurance, and usually forms part of your life policy.

Long-term insurance covers your body, while short-term insurance covers property.

This can get technical, but I’m going to try to keep it simple. While there are many similarities between dreaded disease and disability and impairment, they are not the same.

I oversimplify, but disability refers to your ability to generate an income or practice your profession. Disability looks different for different jobs: if you are paralyzed in your lower legs you will struggle to be a professional rugby player, but you will probably still be able to be an accountant.

Impairment, again, mostly has to do with functions of the body – such as being in a wheelchair. You may not be vocationally disabled, but you are impaired (or impairedas the Red Language calls him).

Both of these types of coverage can take a while before your policy pays out, because permanency must first be established.

Dreaded disease, on the other hand, is a diagnosis thing. You are diagnosed with cancer or a heart attack and the policy pays out (but there is fine print; more on this below).

The most common claims are for cancer (numbers vary from company to company – 44% and 52% are mentioned) and it’s also usually most people’s biggest fear. It can also be an incredibly expensive disease to treat, depending on which type of cancer you have among members.

(Fun fact: Dr. Marius Barnard (Chris van die Harte’s brother) came up with this type of coverage in 1983.)

The purpose of dreaded illness cover is not necessarily to cover all your expenses or to replace your income. It’s usually complementary to your medical and so on.

Of course, the more you have, the further it goes. But it’s not a cheap form of insurance, because the incidence of this type of illness is quite high.

But read your fine print

There is this old joke among the legal profession: “What the big print gives, the small print takes away“. Maybe a little cynical for me, but it’s not without some truth.

For our purposes: Not all dreaded disease coverage is the same.

There is standalone, versus accelerator, for example. The latter is linked to your life cover – think of it as a cup full of water. If you claim for, for example, cancer, this reduces the water in the cup (and therefore your life cover) proportionally.

The problem with that is that while you only die once, you can be unlucky enough to have more than one type of dreaded disease in your life. The problem with standalone coverage is that it is more expensive. (However, my suggestion would almost always be to take it on its own, if you can afford it.)

Then there is comprehensive versus basic coverage. The most common types of dreaded diseases are forms of cancer, heart attacks, heart bypasses and certain strokes. That’s also where most of the claims come from.

But in addition to this, there are all kinds of other diseases that, depending on your policy and company, can also be considered dreaded diseases: from motor neuron disease and even organ replacements, to something like multiple sclerosis (MS).

Basic coverage is usually for just the most common types, while comprehensive coverage includes the other types of illnesses as well. (Again, my suggestion would almost always be to go comprehensive instead, if you can afford it).

Finally, it’s about how the policy pays out. Some policies pay out in levels of severity, while others pay out the whole thing in many cases of first diagnosis. Of course, again, there’s a lot of fine print here, but it’s almost always better to have one that pays out everything from the start.

But: you guessed it, it’s a lot more expensive. However, if you can afford it, go that route. As already mentioned – you are going to have more than enough things to stress about; it will help a lot if money is at least not one of them.

There are of course other things to consider too – some places only cover cancers, for example. Some places also cover your next of kin in certain cases if something were to happen to them.

Just note that many places have a 14 day survival clause. In other words, you have to survive diagnosis by 14 days before they will pay out. Personally, I don’t think it’s fair – after all, you’re paying the premium – but it is what it is, and be aware of it.

As I already mentioned, this can get quite complex. I very, very strongly suggest you talk to your broker and make sure you know how yours operates, at least in principle.

And no, this is not going to make the difficult path of, for example, cancer disappear all of a sudden. But it might allow you to get life-saving treatment overseas. Or buy for your time so you can properly say goodbye to those who are left behind.

  • Leon-Ben is a financial advisor, writer and musician of Wellington.
  • This series of columns follows from the community research of Solidarity Helping Hand. Visit Helping Hand’s website to download the full research reports.
  • Also read “Most SA’ers use a third of salary for debt” on RNews.