Dread disease or critical illness cover can possibly be the most misunderstood of all insurance products. This is partly because people believe their medical aid and temporary or permanent income disability cover will adequately cover them in the event of a dread disease.

Firstly, medical aids generally don’t fully cover the financial implications associated with contracting a dread disease, such as the psychological effects of being sick. Internationally according to Harvard Health Publications, of around 11m Americans alive today, approximately one in thirty people are either undergoing treatment for cancer or who have in the past. Many attest that cancer is not only life threatening but also life altering. Many cancer survivors struggle with “sub-threshold” symptoms of depression, anxiety, and post-traumatic stress disorder.

Furthermore, any income disability cover that you may have will likely not be sufficient either as many of the above symptoms or problems may not meet the criteria for a clinical diagnosis, they are nevertheless often significant enough to cause suffering and disrupt lives, sometimes for years. It is of vital important therefore to have dread disease cover which will enable you and your family to pay for assistance both during and after such an event. If you do not have cover for this, you could potentially lose everything. Many people aren’t able to meet their basic day-to-day expenses as well as other bigger expenses such as their bond repayments, in dramatic circumstances this could lead them to losing their homes. This can be devastating especially with added burden of trying to recover.

Dread disease cover allows you to focus on getting better by assisting you in covering the financial costs associated with a serious illness, but it can also assist in other ways which your medical aid and income protection disability cover can’t. With a dread disease payout you also have the financial freedom to make changes in your life that you might not have been able to before such as an early retirement, new career, start a business, move to the coast or anything else that you have been postponing forever.

Generally, the statistics are scary. You have at least a 25% chance of having a major health issue before 60, and it rises thereafter. This is one of the reasons dread disease cover can be costly. Every year diseases like cancer and heart disease are caught early, and halted for years, so be smart when you take out the cover. Here are some tips:

• Take standalone cover and not accelerated. If the cover is accelerated, the payout will be made from your life cover, reducing it by the same amount. The dread disease is likely to have now made you uninsurable, so you will not be able to buy back or get additional life cover free from exclusions. If it is standalone, then it will not impact the life cover. Your financial advisor should be able to assist you in distinguishing this for you.

• Stepped benefits. Another variation in cover that is often difficult to determine is when you will be paid out, and how much exactly. You shouldn’t assume just because you’ve taken out R1m cover that you’ll be paid out fully if diagnosed with stage 1 severity. In most cases you will only get paid out 25% of the total sum assured at stage 1, but you can go back if it progresses to stage 2. This may not be ideal for your needs. If caught at stage 1, there is a good chance that it will not progress to stage four, or take many years to do so. It may well be preferable for your needs to get a 100% immediately at stage 1. This option isn’t always available from all providers, but your advisor should be able to find one that does.

• Find out how many ‘dread disease’ conditions are covered as this can vary enormously. In a recent comparative study this ranged from 67 conditions to as many as 380, even with large well-established providers. There are also some ‘cheaper’ or ‘direct’ insurers that cover even less. The old adage would probably apply here, that you get what you pay for.

• Temporary and permanent income protection must always be your first priority before taking out dread disease cover. You need to ensure your income until retirement is protected from a potential disability – many of which can be caused by dread disease or critical illness.

So make sure you know exactly what kind of dread disease cover you have and need to get according to your needs, and think practically about how your life could really change and be impacted if it happened to you. Then make sure you mitigate the impact as best as possible.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.  Errors and omissions excepted (E&OE)