What is severe illness cover?
A serious illness brings costs that medical aid does not always pay, and it can mean time away from work for you or your spouse. Severe illness cover, also called dread disease or critical illness cover, pays you a lump sum if you are diagnosed with a serious condition listed in your policy. Common examples are cancer, a heart attack and a stroke.
You can use the money however you need to: treatment your medical aid will not pay for, time off work, travel to specialists, or changes to your home.
How does it work?
- Listed conditions. Your policy sets out which conditions it covers and how each one is defined.
- Severity levels. Many policies pay a percentage of your cover depending on how severe the condition is, rather than all or nothing.
- Stand-alone or accelerated. Stand-alone cover pays out in addition to your life cover. Accelerated cover pays out early from your life cover, which then goes down.
- Survival and waiting periods. Some policies pay only if you survive a set number of days after diagnosis. Some do not pay claims for certain conditions in the first months of cover.
How is it taxed?
Premiums on a severe illness policy you own are not tax-deductible, and the lump sum you receive is tax-free.
Things to know
- It is not medical aid. Medical aid pays for treatment. Severe illness cover pays you cash. You may need both.
- Policies differ a lot. Compare which conditions are covered and how they are defined, not just the price.
- Existing conditions may be excluded. Disclose your health fully when you apply. If you leave out something that would have changed the insurer’s decision, it can turn down a claim.
- Cover at work, if you have it, may end when you leave your job.
Who it suits
Severe illness cover suits people whose household would struggle with extra costs or lost income during a serious illness. It can be especially useful for young families, for people with a bond, and for people who run their own business.