Should You Add Dreaded Disease Cover to Your Portfolio?
It is often spoken about in confidence or not spoken about at all. But dreaded disease cover is a subject that should be addressed far more often. If left disregarded and you or a loved one is diagnosed with a severe illness, it could lead to financial distress or even, in a worst-case scenario, bankruptcy.
These specific additions to life insurance or healthcare policies are certainly not cheap. However, an unfortunate statistic is that one in five people will suffer from a serious illness at some stage in their life, and one in eight will contract cancer before the age of 65. If there is a family history of a certain condition, specifically one of what has become known as, “The Big Four,” chances of you or a family member contracting the condition may be higher.
Does Dreaded Disease Cover Only “The Big Four”?
Dreaded disease cover, also known as critical illness or severe illness cover, is offered by most long-term insurance companies. They usually cover “The Big Four” which are cancer, strokes, heart attacks and coronary bypass graft surgeries; however, cancer is the leading source of most policy claims.
That said, these specialised policies are also known to cover other severe illnesses such as major organ transplants, loss of limbs, Alzheimer’s and Parkinson’s disease, and chronic liver, kidney and respiratory failure. However, many insurers offer varying degrees of cover for these conditions. So, if you or your family are at risk, be sure to check the terms and conditions of the cover before committing to any agreement.
Dreaded Disease Cover is Not for Everyone
Not all critical illness sufferers will be granted dreaded disease cover. All applicants would need to undergo medical examinations before approval is given. Insurers will investigate an individual’s medical history, previous operations, HIV status, mental health issues and other chronic conditions which might exclude the applicant. The applicant’s lifestyle may also be assessed, taking into account exercise routines and smoking and drinking habits.
If you are accepted, however, sufficient cover will be paid out. Payment will be made tax-free in one lump sum or monthly instalments. The money may be used for home alterations to accommodate the patient’s condition, to maintain a standard of living or to travel abroad to receive specialised treatment.
How It Works
There are generally two types of cover. The member may choose between stand-alone or accelerated benefits. A stand-alone option is more expensive and, as the name suggests, is a separate policy from standard life cover. Alternatively, the accelerated benefits would be an advance on an existing life insurance policy. The latter is more cost-effective, but any payments made against it would be deducted at the maturation of the policy’s payout date.
Should Severe Illness Cover be Considered?
Since these options are depreciating investments and devalue with the age of the covered individuals, pros and cons should be evaluated against family history, the recipients’ general health and the projected potential of these conditions befalling the insured.
Sentiment and emotion may cloud these statistical factors and it is for this reason that we at Efficient Wealth have added the human element to this decision-making process. Although it may be costly, the alternative could be catastrophic, both to your family and your finances. Consider consulting with us in person. Our team of professionals will assess your portfolio and advise on the most suitable solution for you and your loved ones. Efficient Wealth – It’s what we do!