What is dread disease cover

Did you know one in five people will suffer from a serious illness at some stage in their life? And one in eight will contract cancer before the age of 65, according to PPS. Whether or not to take out dread disease cover is a burning question for many, especially because such cover is not cheap. Let’s have a look at how this cover works and what to consider when assessing the need for this cover in your insurance portfolio.

What is dread disease cover?

Also referred to as critical illness cover. Is an insurance policy that pays out a lump sum in the event that you are diagnosed with an illness leaving you unable to work. This includes serious illnesses like cancer, organ failure, blindness, heart attacks, strokes, and transplants.

You can use your lump-sum payout to fight back against your illness with medical care, and home renovations to cater to your new condition. Or simply to keep up with the usual day-to-day financial costs.

This can assist you if you need to take a few months off work to receive treatment (such as chemotherapy), recover from major surgery, or perhaps can no longer work in your job due to your illness (such as blindness or Alzheimer’s). The lump-sum payout means that you can rather focus on your health and not worry about how you’re going to pay the month’s bills.

Why Dread Disease Insurance is important?

The big 4 dread diseases are cancer, stroke, heart attacks, and coronary bypass graft surgery. Cancer remains the leading cause of dread disease claims.

Here’s what to consider when deciding to implement dread disease cover and at what level:

1. Your medical aid plan option

If you have a disability cover in place, think carefully about the purpose of the cover in the context of your overall portfolio.

2. Gap cover

The role of gap cover is to provide additional financial protection to medical scheme members who receive in-hospital treatment and care. So that they are not saddled with large out-of-pocket expenses following a hospital event, which means that it can play a role in alleviating medical costs – but mostly in the event of hospitalization.

3. Disability cover

If you have a disability cover in place, think carefully about the purpose of the cover in the context of your overall portfolio.

4. Your affordability

If securing dread disease cover is a financial planning goal, you need to determine how much you can afford to spend each month on your cover.

5. Your health status

You will need to take your current health status into account together with any concerns you may have with regard to any particular illness – specifically if you have a family history of critical illness.

6. Your age

Generally speaking, the younger you are, the more affordable your premiums will be. If you are relatively young and in good health, you can benefit from taking out dread disease cover with favorable underwriting and premiums.

Read: How to save while enjoying life

7. Emergency funding

Lastly, don’t forget to take into account the level of emergency funding you have in place and whether it would be sufficient to provide for your needs in the event of a dread disease diagnosis.

Read: Why you need an emergency fund

Who needs Dread Disease Insurance?

It’s something that we never think we’ll need. Being diagnosed with a critical illness can happen to anybody. It’s a reality that anyone of us may face one day, and you don’t want to have finances standing in the way of getting the care you need.

This is why it’s important for anyone with financial responsibilities to take out Dread Disease Cover, especially those with financial dependents. Remember, even if you have medical aid available to cover your medical fees, there’ll be more additional costs that pop up that won’t be covered.

Consider getting critical illness cover if:

You and your family depend heavily on your income
You don’t have enough savings to tide you over if you become seriously ill or disabled
You don’t have an employee benefits package to cover a longer time off work due to sickness.

Choosing a Dread Disease Insurance

When looking for suitable dread disease cover, it is important to determine exactly what conditions the insurer covers and to what extent, keeping in mind that every insurer has a different product offering and structure. While you might be swayed to take out cover with an insurer who covers in excess of 300 illnesses as opposed to one that only covers 30, keep in mind that it is the likelihood of diagnosis that matters more.

When taking out dread disease cover, you can choose to put in place either accelerated or stand-alone benefits, and the type of cover you choose can have a significant impact at the claims stage. If your benefits are accelerated, it means that the value of a dread claim will effectively reduce your life insurance benefit by the same amount.

For instance, if you have a life cover of R2 million, and you claim R200 000 from your dread disease benefit, your life cover will reduce to R1 800 000. Stand-alone benefits do not have the effect of reducing your life cover and can be sold separately or in conjunction with life cover. Naturally, stand-alone benefits are generally more expensive than accelerated benefits as the insurer stands to pay out more in respect of claims.

When will a policy payout?

A Dread Disease Cover policy pays a percentage of your cover amount when you are diagnosed with a listed dread disease. Such diseases include cancer, heart attacks, strokes, organ failure & transplants, and Alzheimer’s.

The percentage amount paid out will depend on the severity of the illness, the criteria for which can be found in your policy book. For example:

You will be paid 25% of your cover amount if you are diagnosed with a life-impacting disease (i.e. a condition that needs immediate medical attention but has a favorable prognosis).

You will be paid 100% of your cover amount if you are diagnosed with a life-threatening disease (i.e. a very serious condition that needs urgent medical attention and has a poor prognosis).

Critical illness policies cover a wide range of illnesses, conditions, and situations. So it’s important to compare what different insurers can offer you.

How do I buy critical illness insurance?

The best way to get what you need is to get advice from an independent financial adviser or specialist broker. They can take you through the details of the various policies available and make sure you choose the right one.

The advisor will charge a fee for his services, or receive a commission from the insurance company.

There are also specialist brokers and insurers for people who have had insurance applications turned down, perhaps because of an existing medical condition.

What happens if my illness is not on the list of conditions covered?

If you are diagnosed with an illness that is not listed, you will need to determine whether your policy includes a ‘catch-all’ clause. This clause is designed to ensure you are covered for any disease which permanently affects your health and your ability to function on a daily basis.