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Understanding the role of critical illness and lump sum disability

Tue, 01/11/2016 - 12:21

When someone is diagnosed with a critical illness or suffers from a disabling injury, most people are willing to do whatever it takes to overcome the situation, even if it requires depleting retirement savings in order to pay for the best treatment available. However, depleting savings is not necessary in these situations if the individual has disability and critical illness cover as part of their financial plan.


This is according to Francis Aldrich, Technical Marketing Specialist at PPS, who says the purpose of disability and critical illness cover is to pay for adjustments to your home or work-environment in the case of a physical or functional disability and purchase assistive devices. “It can also be used to cover medical expenses that medical aid schemes don’t cover in full like rehabilitation. In some cases the policyholder might not be able to practice their occupation for an indefinite period and proceeds from these insurance products can be used to settle debt or replace income.”


Understanding critical illness cover

He says many people wrongly assume that medical aid is enough to cover the expenses associated with a critical illness, but it is certainly not. “Treatment for dread disease is becoming increasingly expensive and some medical aids might not necessarily cover the full cost of the treatment, especially in cases where a patient has to travel to get treatment overseas or requires extensive rehabilitation or assistive devices.”




This cover will pay out if the member is diagnosed with certain illnesses listed by the insurer, and it is in no way related to someone’s ability to practice their occupation. To explain how this cover works Aldrich creates a possible scenario where a person is diagnosed with a brain tumour that is causing symptoms (like headaches or blurry vision), they have it surgically removed and thereafter are able to continue working and earning an income. In this case, lump sum disability benefits will not pay out. 


However, should this tumour be positioned in a difficult place and no surgeon on South Africa will be willing to operate on the person and that person has to travel overseas to have the operation, medical aid will definitely not cover all these expenses. 


This is normally where a critical illness policy plays a big role as the proceeds from the policy can be used to obtain the best medical care, assistive devices, prosthetics and rehabilitation following the diagnoses of a dreaded disease. 


Understanding lump sum disability cover

Lump sum disability can be claimed if the life insured is no longer able to practice their occupation. Most insurers list specific conditions that will result in a pay-out, regardless of whether the condition affects the insured’s ability to work, but these are serious conditions that usually cause most people to not be able to practice their occupation once they are diagnosed with the disease. Some of these include (but are not limited to and would differ between each insurer) total loss of a sense, wheelchair bound, paraplegia, dementia, end stage AIDS related diseases and end stage cardiac failure.


The role of lump sum disability cover is then to pay off debt (such as mortgages, credit cards, retail accounts etc.) and to be used for capital expenditure for expenses related to the disability, such as making adjustments to the home to make it wheelchair friendly and paying for assistive devices or prosthetics.


In essence, disability benefits will allow the policyholder to continue honouring their financial commitments and provide for their family if they lose the ability to practice their occupation and generate an income due to a medical condition caused by a disease, injury or accident, he explains.


Understanding the connection between the two

There are some connections between the two and in some cases the policyholder will get a pay-out from both these benefits.


“Critical illness will provide a lump sum of money when a policyholder is diagnosed with one of the listed medical conditions and disability benefits will pay out when a policyholder can no longer practice their occupation to earn an income. These products ensure that the policyholder can afford the best medical treatment and assistive devices, continue to honour their financial commitments or reduce monthly commitments by settling debt in order to continue providing for their loved ones in the unfortunate case of being diagnosed with a dread disease or disability,” concludes Aldrich

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