Gauteng, South Africa -- (SBWIRE) -- 11/12/2012 -- If you work, whether or not you have dependents, you will need disability cover. You could be disabled on your first day of work, and you need an income for the rest of your life. Bruce Cameron reports on this often-neglected and problematic type of assurance.
Disability assurance is one of the most problematic areas of life assurance, accounting for most of the complaints submitted to the life assurance ombudsman each year. And many people regard disability assurance as simply an add-on to assurance to cover an early death.
In this last part of our series on risk life assurance, its variations and why it is not simply an add-on life assurance option.
The purpose of life assurance that pays out on death is to ensure that your dependents will be able to maintain their standard of living when you are no longer there to provide for them.
Assurance that covers you in the event of disabling disease or injury ensures that both you and your dependants will remain financially secure. In other words, it is for your dependant s plus one.
No one is immune to accidental injury or serious illness. If you are unable to work for an extended period, you will have financial problems. Disability is not a condition that affects only the elderly; it is the inability to work at any age because of a health or physical problem.
Unless you have dependents, you may not need life assurance against dying. But every working person needs disability assurance, from the day he or she starts to work. After all, you could be disabled on your first day on the job, and, whether or not you have dependants, you will need an income for the rest of your life.
There is a problem with assurance against conditions that prevent you from working: many people simply do not want to work and will invent all sorts of reasons so they can rely on disability assurance instead.
Disability assurance is plagued by fraudulent claims, requiring life assurers to employ medical specialists to ensure that the claimed disability is valid and that it complies with the definition of disability or impairment in your policy.
In an effort to reduce fraud, life assurance companies traditionally tried to limit disability assurance to 75 percent of your income so that the incentive to work would outweigh the desire not to work.
Disability assurance comes in different forms and under different names, including income protection assurance, sickness assurance and impairment assurance.
It is one of the most complex types of assurance because of misunderstandings over the benefits covered, policy definitions and limitations. The choices, limitations and exclusions related to disability and income protection assurance create a legal and technical minefield.
Many disability policies do not come with a commitment to pay you out for the rest of your life, and the amounts that you can expect to be paid may vary dramatically.
It is for these reasons that there are so many complaints to the Ombudsman for Long-term Insurance. Aggrieved policyholders believe they are entitled to a benefit, whereas the life assurance company believes they are still fit enough to work another day, month and year.
Schalk Malan, executive director: product at life assurer BrightRock, says the important issues you need to take into account when buying assurance to cover you and your dependants if you are unable to earn a living are:
- Whether to buy job-based disability assurance and/or medical condition-based impairment assurance;
- Will you be paid out if you have a temporary and/or a permanent disability?
- Will you receive a lump sum payout or regular monthly benefits?
- Will there be a waiting period before you are paid out?
- Will you have to participate in a rehabilitation programme aimed at getting you back to work?
BrightRock was started with the goal of creating insurance products that truly meets consumers’ and financial advisers’ needs. It offers truly individualised life insurance cover that’s built around your specific needs at the outset, and is specially designed to change with you as your needs change. And because BrightRock’s cover is flexible and changes appropriately when your needs change, it’s more efficient. This means both your cover and your premiums remain relevant, and more affordable, throughout your life. BrightRock (Pty) Ltd is an authorised financial services provider, underwritten by Lombard Life Ltd. For more information please visit us at, www.brightrock.co.za.