Picture: 123RF/GAJUS
Picture: 123RF/GAJUS

If you belong to a medical scheme and you have taken out cover for disability, you may wonder why you also need severe illness cover.

Your medical scheme should cover the cost of your treatment for severe illnesses, but it may have annual limits or may not cover the full cost of the specialist treatment you prefer, says Henk Meintjes, the head of risk product development at Liberty.

In addition, you may incur costs adjusting your lifestyle once you have a severe illness.

Meintjes says the payout from a severe illness policy can be used for anything from paying for specialised cancer treatments overseas to hiring a helper at home.

A use of the policy payout is for home care and assistive devices not covered by a medical scheme, or for an au pair to take care of your children while you are incapacitated.

Your disability cover will pay out if you are permanently unable to work. A severe illness may leave you temporarily unable to work, but in the case of a cancer that you are likely to survive, you will not qualify for a permanent disability payout.

If you have an income replacement policy that pays out on temporary disability you may receive a monthly benefit while you recover, but check what income you are covered for and the waiting periods. Also bear in mind that your family may now have additional expenses.

The increasing prevalence of severe illnesses means this cover can be costly.

Four conditions - cancer, heart attacks, coronary artery bypass graft and strokes - form the core of most policies as these are the illnesses that cause in excess of 80% of the claims, but beyond this the life industry covers a wide range of illnesses, Meintjes says.

Plans that cover only cancer will be cheaper than those with comprehensive cover.

Life companies today offer cover for anything from 30 to more than 300 illnesses in addition to the core four on severe illness policies. The breadth of cover beyond the four main illnesses will also affect your premiums. And if you have the misfortune to contract a severe illness that does not fall within a specific definition, comprehensive policies have a catch-all category.

Serious physical conditions can then be assessed and a claim will be paid as long it meets the required definitions thereunder (typically inability to perform activities of daily living or a degree of impairment based on the American Medical Association guidelines), Meintjes says.

Many severe illness policies pay out in tiers, depending on the severity of the illness. If, for example, you are diagnosed with stage 4 cancer, being the most severe form of the disease, you are likely to receive a payout of 100% of the sum insured. But for a cancer with a lesser impact on your lifestyle, the payout may be anything from 5% to 75% of your cover amount.

And if you have a heart attack, your payout will be determined by blood markers and the level of damage done to the heart tissue.

If you have the so-called tiered benefit, you can be eligible for another payout should the illness progress, resulting in a higher severity. But if you are paid out a 100% benefit on first diagnosis, you will not be able to claim again for related conditions.

Comprehensive policies will pay out again if you suffer a claimable event that is unrelated to your first claim. For example, if you have had cancer and received a payout and a year later you have a heart attack, Liberty will pay out again up to 100% for that condition, Meintjies said.

However, be aware that insurers do have slight differences in their definitions of an unrelated claim.

Another factor making a big difference to your cover is whether you have a stand-alone benefit or one that accelerates. Accelerated benefits are effectively an early payout of your life cover and therefore cheaper, but you need to be aware how they can reduce other benefits.

Momentum's head of marketing for life insurance, George Kolbe, says it is very important to opt for comprehensive critical illness cover but to also consider flexibility that allows early payouts. This is the fourth consecutive year Momentum has seen an increase in the number of claims for early stages of critical illnesses. The positive side of this, says Kolbe, is that it indicates that policyholders are consulting their doctors earlier, giving them the highest probability of a successful treatment at a lower cost.

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