As medicine advances, severe illness cover is advancing and you, as policyholder, are likely to get a letter from your assurer at some stage advising you of an “upgrade” of your policy.
Life assurers say they will upgrade your cover to include new illnesses and medical definitions retrospectively without asking you for a higher premium where these upgrades do not have a big cost implication for the assurer.
Where benefits are upgraded significantly, you will be given the opportunity to upgrade your cover for an increased premium. Typically, for a limited period only, you will be able to upgrade without what is known as “underwriting”. This means the assurer will offer you the increased cover as long as your health and other risks are substantially the same as when you took out the cover. If you do not take up the offer within the window in which it is offered, but decide to do so later, full underwriting with medical tests will apply.
Petrie Marx, the product actuary at Sanlam Risk, says a change to a benefit is not always just to add health events for which you can claim; it can also be an increase in the amount paid out for an event that is currently covered or a change to the definition of a current event.
He says other product features can also be added or changed, such as the survival period linked to a benefit or whether, after an initial claim, you can claim again for an unrelated illness.
There can also be limitations on what is included in the catch-all clause, while other, less severe, conditions may be included in the general upgrade, Marx says. He says Sanlam has upgraded its cover only once in the past five years.
Gareth Friedlander, the head of research and development at Discovery Life, says Discovery has upgraded its cover several times without increasing premiums, and has increased premiums only when new benefits have been introduced. For example, Discovery introduced a lifetime benefit providing payments of up to twice the insured amount for certain illnesses in line with their duration and their impact on your life.
Nicholas van der Nest, the director of risk product innovation at Liberty, says Liberty’s policies include a feature that ensures you are covered if you require the latest procedure or diagnostic technique for a particular severity level of illness, and this has made it necessary for Liberty to continually update its definitions.
Jenny Ingram, the head of product development for fully underwritten products at Momentum, says Momentum Myriad has upgraded its cover on its severe illness policies three times in the past five years. Two of these upgrades were automatically applied to clients’ policies at no additional cost and one involved a small additional cost.
In 2014, Old Mutual upgraded its severe illness cover on its Greenlight policies, adding 34 illnesses, child-specific illnesses and nine early diagnoses, and offering a non-underwritten upgrade for a 20-month window period.
Inus Havenga, a Greenlight risk specialist at Old Mutual, says the upgraded definitions made it easier for policyholders to claim, and in some cases the upgrades required a 20 to 30-percent premium increase.
Havenga says the upgraded policy will pay out faster for conditions such as stroke. Early cancer diagnoses now qualify for a 15-percent payout and the balance is paid out if the disease progresses.
BrightRock’s executive director, Schalk Malan, says BrightRock recently upgraded its policies because it introduced a new trauma benefit that guarantees a payment if you are treated for any trauma.
If medical advances define new illnesses, he says, you may still qualify for a benefit payout under a catch-all phrase if your illness is sufficiently severe, but there is a risk youi won’t be covered.
He says if affording an premium increase is a problem, you should look at how efficient your life cover is at meeting your needs. By reducing inefficiencies, you may be able to afford the higher premiums. For example, when debt such as your housing loan is paid off, you may be able to reduce your life and disability cover in favour of severe illness cover, which is important to have when you get older.
Malan says to evaluate new cover, ask your assurer or financial adviser the following:
• Name five conditions that will now be covered that were not covered before. Then check if any of these are familiar to you or are conditions you are worried about.
• What other assurers cover these conditions and at what price?
• If one assurer’s cover costs more, why is this?
Don’t forget that partial payments for different severity levels, whether cover can be reinstated for future claims, and whether or not the cover is for a term – for example, to your retirement age – or for life, will make a difference to the cost.
And some policies include other benefits, such as that offered by Momentum, which gives you ongoing payments after you have contracted a severe illness, or a longevity enhancer payment at age 80 if you have never claimed before.
Marx suggests you also compare the premium on an upgrade offer to the cost of an entirely new policy.