Guiding consumers since 2009

What is severe illness cover?

By Staff Writer

Severe illness Cover pays a lump sum if you are diagnosed with one of the severe illnesses covered by the benefit, explained Karen Bongers, Product Development Actuary at Sanlam.
 
“Severe illnesses usually cause serious physical and emotional trauma and put serious pressure on an individual and family’s finances,” said Bongers.
 
Severe illness cover can protect your quality of life after these traumatic events. Furthermore, it helps you cover additional expenses associated with your illness that are not covered by your medical aid.
 
Bongers explained that the need for additional cash when a severe illness is diagnosed or treated may arise from:

  • The need to get someone else to take care of your children or homecare duties while you are hospitalized,
  • Travel expenses may have to be incurred to go for treatment in major centres, or for relatives to come and visit you,
  • The need to take time off work in favour of a speedier recovery, resulting in a reduction in income for which you might not have sufficient savings set aside.


What should you look out for when getting severe illness cover?

Bongers explained that asevere illness product should firstly cover the four main causes of severe illness claims. Those are cancer, heart attack, stroke, and coronary artery bypass graft.
 
“And it should ideally pay 100% of the cover amount in most of these instances, even when the event is ‘less serious’,” said Bongers.
 
For example a heart attack should ideally pay 100%, whether it’s mild or not, to compensate for the fact that you will likely no longer be insurable after claiming.
 
Definitions Project (SCIDEP) of the Association for Savings and Investment South Africa (ASISA) requires life insurance companies to indicate the percentage of the cover amount they will pay for the four main events, for claims of different severity levels, explained Bongers.

Is severe illness cover the same as medical aid? If not, how does it differ?

Severe illness cover should not be seen as a replacement for medical aid, because only a defined list of conditions are covered with severe illness.
 
“Even when one is diagnosed with one of the defined conditions, the medical scheme should cover the cost of hospitalisation and treatment associated with the illness. It should also be more cost-effective to address the possible gaps in medical provision with gap cover, and not the severe illness cover, because it is for a different purpose,” said Bongers.
 
Severe illness cover is meant for the other, non-medical expenses incurred when being diagnosed with a severe illness, as mentioned earlier.
 
Is it the same as disability cover? If not, how does it differ?

Lump sum disability cover normally only protects you if you are permanently unable to work and earn an income.

“Importantly, it may take time to establish the permanence of a condition, and it is during that time that severe illness cover (along with a medical aid and income protection) is needed to protect you and your family’s finances,” said Bongers.

Bongers went on to highlight that although there is an overlap in the possible claim events, severe illness is different.

“Some clients may be able to continue working even after suffering from a severe illness. In this instance, the severe illness cover will pay out but the disability cover will not.

"Likewise, if someone becomes disabled for his occupation but not as a result of a severe illness or one of the events covered by his severe illness benefit, his disability cover will pay out but his severe illness cover not,” said Bongers.

 When should you consider taking out severe illness cover?
 
Bongers believes that given the global increase in cancer, heart disease and other illnesses, severe illness cover is cover everyone needs to consider, regardless of their family responsibilities.
 
“Taking out these types of cover at a younger age is beneficial, as it becomes more expensive as you grow older. And as is the case with all insurance, your chances of getting a medical exclusion or loading on your cover based on your medical history at time of application also increases as you grow older,” said Bongers. 

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