You might not have a family history of any serious diseases and be perfectly healthy, yet your financial planner will always recommend critical illness cover as an essential component of a holistic financial plan. It is an expensive benefit and therefore not always considered a priority. As financial planners we know that a critical illness can have a serious impact on your finances.
We have learned from our own experiences with family members and clients that cancer knows no age, race, economic class or family history. It can happen to any one of us, even though we all prefer to think that it will never happen to us. Statistics from Cansa indicate that a South African man has a risk of 1:7, and the ladies a risk of 1:8 to be diagnosed with cancer during their lifetime.
The good news is that due to improved medical technology and treatment, cancer can be diagnosed at an earlier stage, and the survival rate has increased to 6/10.
Source: www.cansa.org.za
But what is critical illness cover?
It is a lump sum that will be paid in the event of a critical illness. All companies will cover the “big” four diseases, which are cancer, heart attack, artery bypass graft and stroke. It is clear from the claim statistics from the life assurance companies that these are the major causes of critical illness claims.
Claim stats from Momentum, Liberty and Hollard Life:
| Momentum Claim statistics 2017
Major causes for critical illness claims |
% of claims | Liberty Claim statistics 2017
The top 5 claims causes |
% of claims | Hollard Life
Top 4 Claim causes 2018 |
% of claims |
| Cancer | 38% | Cancer | 24% | Cardiac | 26% |
| Cardiovascular | 21% | Cardiovascular | 20% | Cancer | 24% |
| Nervous system | 12% | Central nervous system and strokes | 7% | Neurological | 10% |
| Musculoskeletal | 5% | Respiratory diseases and disorders | 6% | Muscular | 9% |
| Urogenital | 4% | Musculoskeletal disease and disorders | 3% |
Comprehensive critical illness will provide cover for all major body systems in the event of being diagnosed with a specific illness, suffering from a specific condition or undergoing a specific procedure. The list is endless. A loss of a limb or senses is included, and it will be possible in the event of a claim that multiple claims can be paid if you have disability cover as well. Diseases like Alzheimers and Parkinsons will also be covered under comprehensive critical illness. Every life insurance company offer their own unique benefits.
A minor cannot apply for critical illness cover, however most companies will include the life assured’s minor children.
Why do you need Critical illness cover?
- To help offset the shortfall on your medical aid. The cost of treatment that is not covered by a medical aid can be extensive (thousands of rands).
- To explore alternative treatments that are not necessarily covered by medical aid, and to have access to the latest medical technology.
- For additional day-to-day living expenses which could increase substantially since you might want to eat healthier and make serious lifestyle changes. FMI offer a critical illness income benefit to address this need.
It is difficult to establish the exact amount of cover required, for instance for motor neuron disease. We recommend at least R1 million cover.
This cover can be for the rest of your life or until age 65. It is recommended to select the whole of life option, since you would probably need the cover more after the age 65 than before age 65. It is also important that your premiums do not increase with age, since it can become unaffordable when you are retired, and you need it the most.
This cover can be standalone or accelerated. If the cover is accelerated it simply means that a claim will reduce your life cover, and you would not be able to claim again if your benefit was depleted. Even though an accelerated option is cheaper, it is not worth it due to the possible depletion. Standalone cover is recommended as you would be able to claim more than once for unrelated events. If you have a Hollard Life policy you would be able to claim for related conditions after 90 days of your first claim.
You can select between maximum cover and severity-based cover. Severity based cover will pay out in stages, ie. 25% for stage 1 Cancer, 50% for stage 2, 75% for stage 3 and 100% for stage 4 while maximum cover will pay a 100% for the majority of events and is therefore recommended.
All applications for critical illness cover are be subject to underwriting, and it is possible for the life insurance company to exclude pre-existing health conditions or to load the premium if the condition is not excluded.
Should you not have critical illness cover, seriously consider speaking to your financial planner.
It is devastating enough for a family to cope with a critical illness and the associated financial implications; and even more traumatic if there is no critical illness cover.
by Ronel Botes
Sources:
www.cansa.org.za
Claim statistics received from Momentum, Liberty and Hollard Life