More than 60% of dread disease claims paid by Liberty Life last year were to people under 50.
Dread diseases, such as cancer, heart attacks and strokes, are not the scourge of the elderly but of people in the prime of their lives.
According to Erica Stuart of Liberty Risk, nearly 40% of claims came from people between the ages of 40 and 50, with cancer accounting for 50% of dread disease claims followed by cardiac conditions at 35% . Liberty Life paid out a total of R159-million last year.
Dr Eric Starke, medical doctor at Sanlam, says that one in three males and one in four females will get cancer, with one-third of the population experiencing some form of heart disease. But, despite these figures, employee benefits seldom include critical illness as a benefit. A healthy, non-smoking individual in his or her early thirties can buy R500 000 dread disease cover for less than R160 a month.
Dread disease cover provides a lump-sum payment, which can assist with the medical costs and recovery from a major illness. It can also make up the gap if you do not qualify for disability benefits. For example, a heart attack might not be severe enough to qualify for a disability payout because you can continue to work, but it might mean that you have to cut back on workload. This could affect future income and career prospects.
Understand the cover
One of the criticisms of dread disease cover is that it is often complicated for policy holders to understand and does not always pay out what the policy holder expects. For this reason the Life Offices Association encourages the industry to stipulate clearly at what level of severity payments will be made. Initially when dread disease cover was created in the 1980s by Dr Marius Barnard (brother of Chris Barnard) it covered only cancer, cardiac arrest and strokes. But today life companies provide cover for a range of illnesses, including organ failure and system failure and diseases such as Parkinson’s.
Companies tend to follow two different approaches. Some life companies may pay out a limited number of conditions, but full cover is paid out irrespective of the severity of the disease. Other life companies might cover a broader range of conditions but follow a tiered payment approach, in which the payout is based on the severity of the condition. A policy might pay 25% at stage-one cancer and if it progresses, the remainder of the cover would be paid out, depending on the stages the cancer reaches. A mild heart attack with a full recovery might have a lower payout than a severe heart attack with mild, permanent damage.
Petrie Marx, product actuary at Sanlam, says that Sanlam’s claim profile shows that 90% of claims are for the four major conditions — cancer, heart attack, heart bypass and stroke. He says that it might be more important to know that you will be paid out 100% on these conditions rather than having a broader range of conditions covered, but that only 10% or 25% of cover will be paid out.
Starke says Sanlam recently had a claim in which a woman was diagnosed with cancer before it had reached stage one. But because of her family history of breast cancer the doctors removed her breast. Because of Sanlam’s policy of paying out 100% of the claim, the woman could afford to pay for a prosthesis. Marx says many tiered policies would have paid out only 10% to 25% because the cancer had not progressed.
How much cover do you need?
Stuart says the starting point is to ensure that you have a comprehensive medical aid, which will pay out for serious medical events. Dread disease cover is a top-up that can pay for additional medical costs that your medical aid might not provide. It can also provide you with financial security should you need to take some time off work to recover.
Stuart says it is best to go for non-accelerated benefits. This means that if you claim for a dread disease it will not affect your total cover. For example, if you are insured for R500 000 and have stage-two cancer and your cover pays out R250 000, your total ongoing cover is still R500 000. Therefore if you need to claim again for reoccurrence or another dread disease such as a heart attack, the full cover is still available.
Marx says you should also take your family history into consideration. If you have a history of any dread disease in the family you should opt for dread disease cover. The insurance company cannot discriminate against you because of family history. He says you should also ensure you have traditional cover that is focused on your family condition and which pays out 100% on diagnosis.
Once you have been diagnosed with a dread disease you will not qualify for further life cover. This payment offsets insufficient life cover at a later stage. Having decided on the type of cover you need, the next most important decision is how much cover to get. Important considerations include the number of dependants, outstanding debt and whether your parents are financially independent.