Words such as cancer, heart attack and stroke still strike fear into our hearts, partly because we’ve no idea what would happen if we did get these or any other critical diseases. The good news is we’ve a good chance of surviving them, the worrying part is – can you afford to live? Robyn Daly tackles Petrie Marx on the finer points of Dread Disease Cover.

Last time a broker sat across my desk I felt like a lonely gum tree in an electric storm – any minute lightning would strike me down. Unless, of course, I purchased a protective canopy of complex policies.

It’s not a sparklingly logical response, but also not altogether uncommon. A sound mind would understand that no insurance or warranty can stop things happening to you. Insurance companies just pay out money when said dreadful event takes place. Only if you’ve got the specific insurance, of course.

So when I met Sanlam product actuary Petrie Marx to find out more about Sanlam’s Dread Disease Cover, he had to dig me out of a fairly muddy hole.

“I’ve got medical aid and life insurance and disability through my work, why would I need Dread Disease Cover?” I moaned.

Even though he has the look of a man who knows better, he appeared willing to consider the long-odds that I might not need this additional insurance. “The first place to start is with a financial planner who will look at your risk needs,” he began gently.

Risk needs? I’d never heard of such a mutation of the Queen’s English. But it’s one of those terms bandied around by super-bright actuary types who understand the fine balance between risk and opportunity. So where there’s the possibility that something will go wrong, there’s an opportunity to put a monetary Band Aid on the problem. You remember when, as a child, you hurt yourself, mommy would kiss it better. Well, far from being the grudge purchase we think it is, insurance is the thing that kisses life’s knocks better. It didn’t medically make any difference when you were a kid, but it sure made you feel better and helped to dry the tears. Where there’s risk, there’s a need for a plan to kiss it better.

Petrie is too polite to roll his eyes at my logic. He deals in the parallel universe of numbers and probabilities.

He waves his finger at a bunch of stats: one in four women get some form of cancer, one in three men get cancer, one in two men suffer a cardiac event (a heart attack or similar) … oh it’s too depressing. Bring back the immortal feeling of youth!

It’s not all doom and gloom, though. Besides looking at the threatening illnesses you qualify for, a risk-needs assessment will examine your financial security and the provisions you have made to protect it.

“Life insurance is basically about looking after your dependants,” says Petrie. “Disability insurance is about replacing your income so you can take care of your debts and look after yourself and family. But Dread Disease Cover is more complex.”

Basically Dread Disease Cover pays out a lump sum if you get one of the major illnesses covered by the insurance. This list and the method of payout varies from one insurer to another, so let’s stick to what we know and talk about the cover Sanlam offers. And in this case there are 36 dread diseases that can be covered.

“If you get cancer for example,” Petrie explains, “the Sanlam policy will pay out a lump sum when you are diagnosed with the cancer (some other companies pay out only a percentage for the specific staging of the cancer).” For most cancers, this lump sum is 100 per cent of the cover you’ve opted to take.

Although you can do whatever you like with it, the money is intended to be used to cover associated expenses such as travelling for treatment, accommodation for you and your family while you’re undergoing treatment, lifestyle changes, people looking after your children while you’re receiving treatment and it can even cover taking time off work. “It helps with the expenses associated with re-prioritising your life,” Petrie sums it up.

“People often overlook the impact contracting one of these dreaded illnesses will have on their ability to get further life insurance,” he adds. And that has a domino effect on bond applications and business loans because banks usually won’t provide financing without the security of life insurance.

“Dread Disease Cover is often called a living benefit,” says Petrie rummaging in his computer for more stats. This time they’re quite encouraging: the chances are good that, if we contract a dread disease, we’ll survive it. “Cancer for example: more than 50 per cent of men among newly diagnosed 20- to 40-year olds will be alive five years later. And among women this figure is pushed up to 65 per cent.”

With the giant leaps we’ve made in medical science, the odds are good for surviving a heart attack too: the British Heart Foundation sites that more than 50 per cent of heart attack victims are alive 10 years later. Nearly 70 per cent of stroke victims survive for at least a year, according to the Chest Heart Stroke Association.

“When people ask me ‘How much cover do I need?’, it’s really hard to quantify that. The cost of surviving a dread disease can be enormous, but you would have to firstly work out what premiums you can afford to pay,” says Petrie. “You can take out Dread Disease Cover from R50000 to R4-million. Clients will typically consider an amount of one to two times their annual income for this purpose, and adjust it from there based on affordability considerations.” There are many ways to structure an insurance portfolio and you have the choice of just taking the Core Benefit, covering only cancer, heart attack and stroke or you can take a Comprehensive Benefit which covers 36 listed conditions which include traumatic events such as paraplegia and burns.

“You can also choose to take your cover up till the age of 65 or for your whole life, which would affect the premiums.” Whole life cover is a little more expensive to cover the greater risk of contracting a dread disease after the age of 65.

“The key to keeping your premiums low is to take out insurance while you’re still young,” says Petrie. A 25-year-old non-smoker taking out R1-million worth of whole-life Dread Disease Cover on a level-premium basis would generally pay R201 a month. If they were just taking out the same cover at the age of 45, the premium would increase to R770 a month. (This is only a rough estimate and will vary according to the circumstances of the individual.)

Other factors, besides age, which will affect your premiums are health considerations: are you a smoker or non-smoker, for instance. And socio-economic class also carries a weighting – the lower the class, the more expensive the premium will be. As with other life-insurance products, you may need to have a medical, provide a medical history and have blood tests done and the results of these will also affect your premiums.

Tags: Disability insurance, Dread Disease Cover, heart attack, insurance, life insurance, medical aid, Petrie Marx, risk, Sanlam, stroke