There is a lot of confusion over exactly what disability cover is compared to impairment cover — which cover you need and whether both are covered by your policy. Loosely defined, disability cover is when you are unable to work and impairment cover is when you lose a limb.
The problem is, which cover do you need? Eugene Kruger, the product development actuary for Metropolitan Life, says customers find themselves having to choose between a disability policy or an impairment policy to avoid overlapping costs, but this left them unprotected under certain circumstances.
It is quite possible, for instance, that a person may be completely and permanently unable to perform their own or a similar occupation, but only slightly physically or functionally impaired. For example, a surgeon who loses a finger cannot do their job, but may only get a 10% payout if he/she only had a functional impairment benefit whereas they would be entitled to a 100% claim if they were covered for occupational disability.
Vice-versa, an individual could be paralysed in an accident and still be able to do their sedentary administration job, so they would not able to claim under own occupational disability benefit, but would be eligible for a 100% claim under an impairment benefit. While the person may be able to perform their job, there are still enormous costs involved in adjusting to life in a wheelchair.
As life is about as certain as a lottery draw, life companies have now introduced a combination of impairment and disability to cover both eventualities. Kruger says while there is still a big overlap, the combination policy is much cheaper than the sum of two individual benefits and avoids the guesswork when trying to choose between the two. Check your life policy, especially if you have had it for a few years, and make sure you have the total cover that you may need.