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By Liam Doyle

The policy for the most dire diagnosis: Dread disease cover

Dread disease cover is an insurance benefit, which is payable in the case of a diagnosis of a severe disease. Many policies offer a once off, tax-free lump sum payment that is applicable if you are ever diagnosed with a severe illness. The options that many insurers offer are either as standalone or supplementary benefits. Policies can also offer a percentage payout, depending on the severity of the disease.

The unfortunate statistical reality is that you are less likely to become disabled or die prematurely than contract a dread disease. A diagnosis like this would have a serious impact on your quality of life, and you need to ask yourself the question: What would your finances look like if this happened to you?

The origins of Dread Disease Cover

Dread disease cover is a truly South African innovation, first introduced to the world by Dr Marius Barnard. He was the brother of the famous Dr Christiaan Barnard, the world’s first human heart surgeon.

Dr Barnard was able to extend patients’ lives through successful surgeries, but he recognised that there was a need for them to deal with the financial costs of surviving a major illness as well.

The product was launched in South Africa on the 6th October 1983, at first covering only the four primary health conditions, which were coronary bypass surgery, heart attacks, strokes and cancer.

The dread diseases covered today

Even today, these original four illnesses account for between 70% and 90% of all dread disease claims, with cancers and tumours leading the causes for these claims, accounting for about 30% of all critical sickness claims.

It is difficult to navigate exactly which conditions are covered by a particular policy, since policies can have multiple variations and many are a unique combination of sicknesses covered. Some conditions are comprehensively covered, with others having more limited cover.

There are some common conditions that are usually covered beyond the original four. These can include conditions and diseases on the following list:

Kidney failure, paralysis, blindness, loss of speech, coma, major organ transplant, losing a limb or limbs, accidental HIV, full blown AIDS, heart valve and/or aortic surgery, deafness, major burns, chronic liver or respiratory failure, accidental brain damage, impairment resulting from a benign brain tumour, cerebral aneurysm, dementia, motor neuron disease, Crohn’s, Parkinson’s and Alzheimer’s disease, multiple sclerosis, aplastic anaemia, muscular dystrophy, motor neuron disease, rheumatoid arthritis, hydrocephalus requiring a shunt, coronary artery angioplasty, carotid artery angioplasty, carotid artery surgery, infective meningitis, pericarditis, Guillain-Barré, ulcerative colitis, systemic lupus erythematosus (the most common form of lupus).

PLEASE NOTE: this list is not meant as specific to any particular dread disease cover policy, and it is also not exhaustive of every possible condition that could be covered by a particular policy. This list is simply indicative of the types of conditions that can be covered by dread disease cover. The product you finally adopt will be very clear on exactly what is covered, and payouts could depend on the severity of the condition a policyholder suffers. This again varies from policy to policy, with some policies including open-heart surgery. While almost all policies offer cover for heart attacks, cancer and strokes, there are policies that cover only cancer.

Exclusions and pre-existing medical conditions

There are, of course, also specific exclusions attached to any particular policy, making it is imperative that you are aware of what is and what is not covered by your dread disease cover.  

There are some general exclusions, which usually include self-inflicted injuries and suicide attempts. Drug and alcohol abuse scenarios are also often ruled out.

In order to cover a pre-existing medical condition you will in all likelihood have to pay a higher premium.

It is very important to read the fine print and understand these exclusions, which is why it is highly advisable to seek advice from professionals before choosing dread disease cover.

Minimum survival period

This is uncomfortable to mention, but something you need to be aware of: most dread disease cover products require that you survive for a period of time after your diagnosis. Often, this ranges from periods of between fourteen to twenty-eight days.

The cost of dread disease cover

Various factors impact the cost of a dread disease policy, which can be expensive. In general, the younger you are when taking out the policy, the more affordable your monthly premiums will be.

It is also important to factor in inflation, since premiums will escalate each year. You must ensure that your policy keeps pace with the rising costs of living, since it would be terrible if your cover lost comparative value over time. A professional broker can make sure that this does not happen to you.

How to use the payout

It is entirely up to you how you make use of the money paid out. Since it is a tax-free amount, you would not need to factor that in as a deduction. As the disease worsens you might be paid out on multiple claims. This is when a policy pays out a percentage of the cover depending on the severity of the illness.

The original idea of dread disease cover was to use it for the expenses unrelated to the direct medical costs of the disease. While medical aid and gap cover would pay for the medical bills, such as doctors and hospital fees, dread disease cover could pay for ramps to be installed if confined to a wheelchair, as an example. It could be used to buy a range of wigs if undergoing treatment for cancer, or it could be used to employ a home nurse or for the travelling expenses to see a specialist. New technologies and treatments might not yet be covered by medical aids, which is where dread disease cover could be a lifeline.

The lump sum or incremental payouts could even be used to pay off a bond or could cover rent for a period. If you recover from the illness, it could be used for a recuperative family holiday.

An insurance product now available worldwide

From its local beginnings, dread disease cover is now available in many countries around the world and it is well established in the United Kingdom, Australia, New Zealand and Ireland. The popularity of these policies continues to grow in the USA, Canada and even the Far East.

It is known by many other names, including critical illness cover or insurance, trauma insurance, living insurance or dread disease policy. Severe illness cover is another term used.

Though there may be nuances in different territories, the basic concepts remain the same. The people of the world owe Dr Marius Barnard a great debt.

Morebo and Dread disease cover

As medical science advances, it means we live longer with our diseases and are less likely to die from a sickness. However, it is not only a matter of physical survival, you have to consider your financial survival as well.  

As we saw above, there are hundreds of variations of what policies cover. Before choosing your policy, speaking to an independent advisor is essential.

Morebo is here to assist you with your specific needs. It is never comfortable to consider a product such as dread disease cover. Let us help you to navigate this tender subject and find the product that will suit you best. With our specialised software, we will be able to generate a meaningful cost and benefit comparison for your particular needs. This will allow you to make the best decision on what product best suits your requirements.

PLEASE NOTE: This article is for informational purposes only. It does not amount to advice. Before acting on the information contained in this article, we recommend that readers consult an expert on the topic. Contact Morebo today for more details. Our consultants can assist in choosing the right dread disease cover for you today.

Bibliography/Further Reading:

https://www.moneyweb.co.za/financial-advisor-views/dread-disease-cover-how-does-it-work-and-do-you-need-it/

https://www.moneyweb.co.za/financial-advisor-views/dread-disease-cover-is-a-truly-living-benefit/

https://web.archive.org/web/20071015022642/http://www.oft.gov.uk/shared_oft/reports/financial_products/oft168.pdf

https://www.dailymaverick.co.za/article/2020-08-30-dread-disease-cover-has-become-more-critical-than-ever/

https://web.archive.org/web/20120707092303/http://www.actuaries.org.uk/sites/all/files/documents/pdf/Barnard.pdf

https://web.archive.org/web/20141129012935/http://www.mortgagestrategy.co.uk/2016259.article

https://www.investopedia.com/terms/d/dreadeddiseaserider.asp

Wikipedia has a helpful summary of the topic – https://en.wikipedia.org/wiki/Critical_illness_insurance

Sources from other insurers:

https://lifeinsurance.standardbank.co.za/articles/serious-illness-or-dread-disease-insurance-what-does-it-cover

https://www.outsurance.co.za/life-insurance/critical-illness-cover-table/

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