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Health insurance is a very broad concept. Products in the health category fall into both the “life” insurance and the short term markets. In short the difference between the two is:
Life insurance products are for “life”, and once they have been entered into, they cannot be cancelled by the insurer (unless the insured defaults on the payment of the premium or there has been material non-disclosure by the client).
Short-term insurance contracts are essentially renewable at the discretion of the insurer, and are subject to (annual) adjustments to the premium and/or conditions of the policy.
Typical “health” insurance products in South Africa include:
- Dread disease (critical illness) cover – is for things like cancer, heart attack, stroke, kidney failure. It pays out over and above anything paid for by your medical aid or any other medical insurance. Statistically this is your most likely area of claim.
- Impairment cover is similar to disability cover but is not a “subjective” form of cover. The degree of impairment can usually be objectively measured by means of pre-specified definitions such as loss of a limb or limbs, loss of sight or hearing, fingers, major burns among many others.
- Hospital insurance is usually sold as a short-term insurance product (often advertised on TV) and pays a specified amount per day spent in hospital. No hospitalisation – no pay.
- Funeral policies are payable when the insured person dies (watch out for the exclusions on these policies). Typically there is little (if any) underwriting and as a result anyone can be covered and the premium is quite expensive relative to the cover provided.
- Income protection and disability cover is not really “medical” cover but will often qualify for a claim if you can’t work as a result of a medical condition. Income replacement cover is more expensive but is the most likely area of a successful claim. Typically, disability cover is subjective (at what stage are you disabled?) and as a result, the experience for would-be claimants can be quite difficult.
- Gap cover is a relatively new form of medical insurance cover. It is a short-term product that covers the gap between what the hospital charges and what the medical aid pays. Again, no hospital, no cover.
Sometimes, life insurance is considered to be another supplementary insurance. Life insurance is not an investment – it only pays when you die, so make sure you really need the amount of cover that you have. It is there to cover a financial risk that you can’t afford or are not prepared to take, not to buy your family a yacht after you die. People often have excessive life insurance, yet their retirement funding and investment falls short. It’s about balance.
(Gregg Sneddon, Health24, March 2011)
