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Critical Illness

What you need to know about Critical Illness

Statistics have shown that there has been a worldwide increase in the number of critical illnesses being diagnosed which can probably be attributed to the changes to our lifestyles. When this is combined with the advances in medical care that allow people to recover from critical illnesses as well as being able to live for long periods with a critical illness, critical illness (or dread disease) cover is becoming far more relevant nowadays.

The infographic below, prepared by Momentum, highlights some of these disturbing statistics reinforcing the requirement for this type of cover.

70% of critical illness claims in South Africa relate to what are known as the Big 4 conditions viz.

  1. Heart attacks
  2. Cancer
  3. Strokes and
  4. Coronary Artery Bypass Graft

While medical advances enable better detection and treatment of these critical diseases, allowing more people to survive, only a few people enjoy the same lifestyle. Adapting to all the changes can be very costly which will have a major impact on a person’s finances.

On average, surviving after a stroke would cost between R500 000 and R1 million over the lifetime of the patient, including initial rehabilitation and chronic medication. Living with Alzheimer’s can cost more than R1 million in medical and lifestyle expenses.

What does critical illness insurance cover?

While your medical aid should cover most of the hospital costs, critical illness cover pays out a lump sum which may be used for

  • Supplementing your medical aid for costs not covered
  • Paying for ongoing medical costs that may not be covered (or only partially covered)
  • Paying to be able to access the best medical expertise and technology.
  • Paying for additional expenses or reduced income because of lifestyle changes.

How does it work?

The benefit pays a tax-free lump sum which you may use in any way you see fit.

The pay-outs are typically timed and are tiered for different severity levels. To establish an element of uniformity regarding these critical illnesses and their degrees of severity, the Association of Savings and Investments of South Africa (ASISA) have issued a set of standard definitions, referred to as the Standard Critical Illness Definitions Project (SCIDEP).

The definitions for any critical illness categories are based on either an illness being diagnosed, development of a physical impairment, or the performing of a particular procedure. Provided the definition criteria are met, a payment is guaranteed, helping to eliminate subjectivity or confusion on the part of the claimant or their treating doctor.

Critical illness claims submitted are evaluated against these definitions and grids pay-out guidelines.

The pay-out grid typically defines a 25%, 50%, 75% or 100% pay-out depending on the severity. This is illustrated by the table below:

Should you develop an early stage of a disease, a benefit commensurate with the effect on your lifestyle and your needs would be paid out accordingly, leaving the remainder of the benefit intact.

Should the illness worsen, a further benefit would be payable. This allows for further claims for more serious illnesses rather than paying out the whole benefit immediately and leaving nothing should another claim arise. The remaining benefit is therefore intact and continues to grow with benefit increases every year.

This cover is often cheaper. The lower pay-outs for lower severities mean that large pay-outs are not made for an illness from which a person may make a full recovery, and which will therefore have a lesser financial impact. Advances in medical science have allowed many diseases to be detected earlier therefore allowing complete recovery in some cases.

The question that therefore needs to be asked with regards to critical illness is not if, but when will you be affected by a critical illness, how long will you have to live with it and what will the cost be?

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