Let this cover stop the holes

Henry

We talked about medical funds in this space last month.

But, as anyone with experience of the sector knows, there are often claims where everything doesn’t pay out. There are many reasons for this, but understanding them does not close the hole in your pocket.

It’s like Eskom and load shedding: I may understand the reasons (poor management, wet coal, rotten cadres), but if I want to keep the lights on, I have to make plans myself. Think rectifier, generator and batteries.

Most medical funds are not poorly managed by rotten cadres, but there are still gaps.

This is where gap coverage (or gap coveras you call him in English) come in.

It’s not medical, it’s rather a form of short-term insurance. It also doesn’t always pay for everything, but it closes a hole (even if you pay for that privilege).

As usual – this is not advice; it’s just overview. Go see your realtor.

What is gap coverage?

It’s basically extra cover, if you already have a medical fund in place. As the name suggests, it fills the gaps left behind after some claims.

It is also a form of short-term insurance. That’s important, because it means it’s something you claim back after you’ve paid for it yourself, rather than something they pay on your behalf.

Gap coverage actually only exists because, as the name suggests, there is often a gap between what providers charge, and what the funds pay out. I won’t go into the whys here – it’s technical, and it is what it is.

Just know that if your doctor pays out 100% or even 200% of their rates, you can prepare yourself that there will still be expenses for your own pocket. And that gap can be quite large: anything up to four or five times what your fund pays out.

But, just like a double bed sheet on a king-size mattress, gap coverage doesn’t cover everything. It’s not for things like day-to-day medical expenses or visits to your GP.

It’s mostly for when you’re hospitalized (think childbirth, heart surgery, etc.), or certain out-of-hospital procedures (think here of certain cancer treatments).

You can save yourself a lot of frustration if you remember that there will still be things for your own pocket, and that you have to pay first, and only then claim back (as mentioned above). Read your policy documents!

Put another way: it doesn’t pay for every thing your medical doesn’t do. It’s like the monkey gland sauce you pour over your steak – complementary, rather than the focal point.

What does it cost?

How hot is a barbecue fire? What I mean by this is it depends. There are different options, which cover different things, and also have different prices. It also depends on who you do it with.

Some gap covers pay out a lump sum for cancer, for example, or cover certain emergency dental procedures, or MRI scans, or even accident-related death.

As with medical, there are some gap covers that have their own network of providers that they prefer you use. This makes the premium cheaper, but binds you in terms of where you might go.

The broad rule here is as with anything: all things considered, the more you pay, the more coverage you get. Usually.

Note that the current statutory limit that can be paid out per beneficiary per year is R192 000. It is adjusted annually.

What else should I consider when choosing it?

Most importantly, there may be waiting periods. For example, most providers have an exclusion on something like claims for pregnancy in the first 12 months, for obvious reasons.

So if you plan to get pregnant, take the waiting period into account. (Drinking too much chardonnay when you’re on summer vacation and making decisions outside of your planning isn’t going to make the waiting period go away.)

Most also have a general three-month exclusion.

Also, make sure your chosen provider has funds to pay out claims – the last thing you find out at claim point is that they have no money. Of course, there may be things lurking that you don’t know about, but do your research ahead of time.

Some gap covers are limited to only certain funds. So go where makes sense for your fund. It’s just like you can’t go to Laerskool Sirkel’s parents’ evening to complain about Hoërskool Vierkantswortel’s policies.

It’s also one aspect of your medical portfolio, together with your medical fund (which you need anyway to have gap coverage). I would also very strongly suggest that you consider dreaded illness cover as well – something I will write about in a future column.

It’s not free either, so make sure it fits into your budget. Sometimes it is better to look for medical providers who pay medical aid rates instead, or to change your medical aid option (if this is possible).

Yes, it is complex. Talk to your broker, but also do your homework.

  • Leon-Ben is a financial advisor, writer and musician from 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.