Risk Solutions (Death-, Disability-, and Severe Illness Cover)
Death is not an easy thing to speak about but it is a reality that we all have to face eventually. You need to know how your family, your dependents and beneficiaries will be affected if you die. You also need to educate them about what they can expect and what they should do in the event of your death.
Why do you need Death Cover?
Death cover is an insurance policy that will replace your income for your dependents as a result of your death. Death cover is based on the needs of your dependents.
Do you have enough cover?
Aspects to consider: Repaying or servicing outstanding debt, household expenditure, medical costs, if you have children you should think about providing a monthly income for each child until a pre-determined age. You should provide for: Cost of Living, Education & Tertiary Education, Entertainment, Medical Expenses, Provision for future needs and lifestyle changes.
Disability insurance cover protects your most valuable asset - the ability to earn your income over an extended period of time. If this ability is curtailed, either through disability or through impairment, you may need to ensure that you have cover to meet your financial requirements. This does not only apply if you have dependents. It is as important as if you have no dependents, as this enables you to remain financially independent of others.
Impairment vs Disability
Impairment implies a physical or functional disorder, but does not stop us from earning an income (loss of a limb / loss of eyesight).
Disability implies an inability to earn an income.
Types of Disability
Own Occupation (if you are unable to perform current nominated occupation), Occupational Disability (if you are unable to perform your nominated occupation, or a similar occupation) or Total Disability (if you are unable to work at all).
Forms of Disability Insurance
1. Monthly Income Protection
Income protection may comprise of either a permanent or a temporary benefit. With permanent income protection, benefit payments will usually continue from date of disability until age 65 to 70. The level of cover is usually limited to your total income. With temporary income protection, benefit payments do not normally exceed two years.
Key points to consider:
What is the waiting period before a disability insurance benefit commences?
Will the insurance escalate annually?
To what age will the benefit continue?
2. Capital / Lump Sum Benefit
A specified Lump Sum will pay out if you are deemed to be permanently disabled or permanently unable to earn an income. Capital disability cover should be used to settle debt and help with lifestyle adjustments that are required as a result of your disability.
Should you have Disability Insurance Cover?
If you earn an income, or are going to be an income earner, then you should have some form of disability cover. Your ability to earn an income is your most valuable asset, and is likely to be the driving force behind the accumulation of any other assets over your working life. It is imperative that you provide cover in the event that this earning ability is impaired. How much disability cover you need is dependent on your personal requirements and current financial affairs.
Critical Illness / Dread Disease Cover
The insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy.
It offers financial protection against illnesses such as a heart attack, cancer, stroke, Alzheimer’s and Parkinson’s. It also covers injuries from accidents such as paraplegia, major burns and brain damage. It pays out a tax-free lump sum you can use in any way you like.
Why do you need Critical Illness / Dread Disease Cover?
Critical Illness benefits can provide additional funds for the following:
- To help offset any shortfall on your medical aid.
- For additional expenses or reduced income because of lifestyle changes.
- To access the best medical technology - something that medical aids don’t always do.
Lifetime likelihood of suffering one of the following diseases:
1 in 2 - Cardiovascular Disease
1 in 6 - Strokes
Beween 1 in 2 and 1 in 3 - Cancer