Dread Disease Risk Cover should assist with lifestyle changes - not replace long term lost income potential

Consumers are constantly challenged with deciding on the appropriate amount of risk cover they need and how this should be allocated amongst the various types of cover available such as death, disability, impairment and illness. This varies from person to person and even during the lifetime of an individual as their lifestyles and circumstances change.

Most of the time consumers unfortunately adopt an extreme approach – they completely ignore risk cover, or at the other end of the spectrum they over insure against every single possible risk. Achieving a balance is always difficult.

Andrew Warren, Liberty Life Business Development Executive, says that if consumers are in any doubt as to which types of insurance cover to opt for, death and disability would be the key components in any cover design. “The first step is always to protect your existing income and wealth. Once these are taken care of, individuals should then ideally include functional impairment, dread disease and accident cover, if they are able to.”

Looking specifically at dread disease - sometimes referred to as critical illness, serious illness insurance, crisis cash, trauma cover and living benefits - this form of cover usually pays out a benefit in the form of a lump sum after an individual has been diagnosed with a ‘dread disease’ condition.

Warren explains that dread disease cover assists the policy holder during the recovery stage and aims to ensure the best possible medical care and rehabilitation therapy, recuperation aids and required lifestyle changes, such as modifying one’s house. “The costs involved when a person is diagnosed with a dread disease can be crippling. Dread disease insurance also assists with the continued repayments of outstanding debts such as a home or car loans, and replaces the income lost if long leave for convalescence is required. The last thing you need when recovering from a severe illness is the added financial worry of paying for your recovery.”

Andrew adds “It is important to note that dread disease insurance cover is not intended to cover the loss of income from occupational disability if the disease impacts on the long-term income-earning capability of the policy holder. This is when it becomes key for the policyholder to have disability cover which would then compensate for the longer term loss of earnings which may arise from longer-term effects of the dread disease.”

The list of covered dread diseases has evolved over time but does differ between insurance companies. Warren notes that twenty five years ago the list of dread diseases was a short one covering only heart attack, cancer, stroke and coronary artery by-pass surgery. “This has increased significantly and some companies now cover many more diseases. Diseases covered can vary from one insurer to the next and are constantly evolving as consumer needs change.”

Dread diseases can include Alzheimer’s; blindness; deafness; kidney or other organ failures; organ transplants; multiple sclerosis; HIV/AIDS contracted by blood transfusion or during an operation or otherwise accidentally; Parkinson's disease; paralysis of limbs; cancer; leukaemia; cardiovascular, brain, cerebrovascular and gastrointestinal system diseases; aplastic anaemia; muscular dystrophy; connective tissue diseases; loss of senses; and certain traumas.

Warren emphasises that policyholders must make sure they completely understand the extent of their cover and the risks of being diagnosed with an ‘uncovered’ disease. “No list can be exhaustive - There may be an illness specific to that family and the policyholder is more susceptible than most to contracting it, but it may not be listed as a covered disease. Unfortunately if the policyholder contracts a disease which is not listed then chances are that he/she will not receive a payout. Obviously this is very worrying for consumers and why Liberty Life has introduced a catch-all benefit which pays out for any condition which has a serious financial impact on the policyholder’s lifestyle and is equivalent to a condition that qualifies for a 100% payout under another benefit category, and results in a whole person impairment of greater than 70%. This gives clients even more peace of mind.”