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Financial planning and the cost of cancer

07 November 2013Dr Eric Starke, Sanlam

If you are diagnosed with a dread disease such as cancer, money is the last thing on your mind. The reality however is that the financial implications stretch far beyond the cost of the treatment you will need. Not having the right cover in place for a host of costs your medical scheme will not pay for, could have a devastating impact on your finances.

Dr Eric Starke, senior medical adviser at Sanlam, says the three important areas of cover that people need to consider are income protection, dread disease cover and disability cover. "People often think that belonging to a good medical aid scheme is sufficient. But your medical bills are only one part of the picture.”

Protecting your income

Being diagnosed with cancer and requiring surgery, radiotherapy or chemotherapy may mean that you’re temporarily disabled to such an extent that you’re not able to continue working. This could mean you can no longer generate an income – and if you’re a parent or a breadwinner, this can be financially crippling for your family. An income protector benefit will cover you for loss of income when you are temporarily disabled due to a dread disease such as cancer.

When considering an income protector benefit, you must take into consideration the option of the different waiting periods, as this will have an impact on the affordability. The shorter the waiting period, the more expensive the benefit, but then your claim will be paid earlier during the period of disability.

"This is by far the most important cover besides belonging to a medical scheme, especially if you are self-employed,” says Dr Starke.

He says people often make the mistake of taking out permanent disability cover before they have income protection. "Disability cover will only become effective if you are deemed to be totally and permanently disabled. In the interim, while the condition has not yet reached the point of permanency, what are going to live on? Your ability to earn an income is your greatest asset, and it is crucial that you protect this.”

Cover for dread disease

While cancer treatment can drain your finances, the associated costs of your treatment can have an equally dire effect on your bank balance. This is where dread disease cover can offer critical assistance. It ensures that you’re able to claim for financial assistance should you be diagnosed with a severe illness. Dr Starke says dread disease cover, which pays out as a lump sum, can be used for the following:

• Travel to and from the medical facility at which you are receiving chemotherapy or other treatment

• Accommodation for relatives while you are being treated

• Your basic expenses, such as a home loan or car instalment

• The costs of a carer during an extended convalescence period

• Taking care of your children, and organising transport or homecare duties while you are ill.

"You can also use your dread disease cover to pay for treatment your medical scheme may not cover, such as reconstructive surgery in the event of breast cancer, or expensive biologics used to treat various types of cancer. Some of these newer medicines, which can prolong your life but are not always covered by your medical aid, can cost in the region of R50 000 per month, Dr Starke says.

Cover for permanent disability

If you become ill with cancer, you may be permanently unable to continue working. Permanent (also called capital) disability cover is aimed at offering you financial protection should this happen. Disability benefits will be paid as a lump sum if your impairment causes total and permanent disability. A needs analysis taking into account your income and existing disability cover will determine how much additional disability cover you would need in case you become totally and permanently disabled.

According to Dr Starke, cover for income protection, dread disease and disability can either be taken out as stand-alone product, or they can form part of a combined package. "Affordability of additional financial insurance is obviously a key consideration, along with an analysis of your needs as well as your age. For example, for a 25-year-old with no dependents, income protection would be the most important type of cover. If you know you have a family history of cancer, however, you may want to also include some level of dread disease cover. If you can afford it, you can then consider permanent disability cover.”

It is crucial, however, to obtain the services of a qualified financial adviser before making a decision. "There is a plethora of personal cover products to choose from, and no two companies have exactly the same products or the same claim payment conditions. You need to understand what each product covers, the level of benefits, any exclusions, and the meaning of the policy wording. Everyone’s circumstances are unique, so the most appropriate product will be very different from one person to the next.”

He advises clients to consult their financial advisers to ensure there is a good balance between what they need and what they can afford. "If you have to prioritise, make sure that you at least have the most basic cover in place – you can always increase it later, through an alteration, or you can purchase an extra product. But don’t do nothing! No-one likes to think they might one day be diagnosed with cancer. Yet one in six people in South Africa have a lifetime risk of developing cancer. It strikes without warning and without regard for age or income level,” Dr Starke concludes.

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