When it comes to ‘life’ or ‘risk’ assurance, putting a monetary value on Dread Disease cover is almost impossible. Life cover and disability cover are easily reduced to numbers, you just work out the cost to you or your family should either of those events happen.
So, say (just as an example) you have a massive heart attack with triple bypass surgery. You have a decent medical aid, so your out-of-pocket expenses are minimal. Your doctor books you off work for 6 months – that’s going to cost, right? Yes – but that is what temporary disability cover is for. The doctor recommends lifestyle changes – no more smoking or drinking. Financial implications? A saving.This sort of story repeats itself for most dread diseases, so why is dread disease cover so popular?
There are a couple of ways to look at it: Genetic gambling and anger.
If you have a family history of dread disease, especially heart disease or cancer, there is a far greater chance that dread disease cover will be high on your agenda in terms of risk cover. This is very sound reasoning, there is a higher chance that you will have inherited similar genes. Recent studies have shown that lifestyle only accounts for 30% of the potential risk of getting a dread disease, and genetics certainly pays a role. Ironically the biggest contributing factor is ‘bad luck’. By covering this risk you will effectively be playing the genetic/bad luck lottery. The pay-out you get will effectively be a windfall and compensating you for the ‘bad luck’, basically because you can’t take your ancestors to court and sue them for the ‘bad genes’. Make no mistake, there is nothing wrong with this. It gives one closure, and more importantly should stop the unhealthy need to blame someone – or yourself. With a dread disease payout, someone has ‘paid’ for the crime of your bad luck, or genetic predisposition. That windfall gives you financial freedom to make changes in your life that you might not have been able to before. Early retirement, new career, start a business, move to the coast and so on.
The statistics are scary. You have at least a 25% chance of having a major health scare before 60, and it rises thereafter. This is one of the reasons dread disease cover is expensive. Every year diseases like cancer and heart disease are caught early, and halted for years, so be smart when you take out the cover. Here are some insider tips to get the best:
- Make it standalone cover, not accelerated. If the cover is accelerated, the pay-out will be made from your life cover, reducing it by the same amount. That dread disease is likely to have made you uninsurable, so you will not be able to buy back that life cover. If it is standalone, then it will not impact your life cover. It isn’t always that black and white on the various provider policies, so ask your advisor the question directly.
- Stepped benefits: Another variation in the cover that is often difficult to decipher is WHEN you will be paid out, and HOW MUCH. Don’t assume because you’ve taken out R1m cover that you’ll be paid out if diagnosed with stage 1 severity. In most cases you will only get paid out 25% at stage one, but you can go back if you get sicker. I don’t know about you, but I am not a huge fan of that approach. If caught at stage one, there is a good chance that it will not progress to stage four, or take many years to do so. I would rather a client get a 100% payout for a smaller amount at stage 1. This option isn’t available from all providers, but your Independent advisor should be able to find one that does.
- Find out how many ‘dread disease’ conditions are covered. This can vary enormously. In a recent comparative study this ranged from 67 conditions to 380 even with large well-established providers. There are also some ‘cheap’ or ‘direct’ policies that cover even less than this. If it’s cheap it is probably nasty.
- Temporary and Permanent income protection must be your first priority before taking out dread disease cover. You need to ensure your income through to retirement is protected from a potential disability – many of which can be caused by a ‘dread disease’
Actions: Make sure you know exactly what kind of dread disease cover you have, and uncover the reasons why you want it!
Author Dawn Ridler