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What the major life assurers offer

Personal Finance

This article was first published in the 1st quarter 2017 edition of Personal Finance magazine.


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Illustration: Colin Daniel

How well do you know the life assurance companies? If you are like most South Africans, probably not very well at all. A widespread lack of understanding of life assurance products and what they are designed to achieve have left many of us without the cover we need to maintain our lifestyles or protect our families in the event of disability or death.

Those of us who do have a reasonable amount of life assurance in place, often opt out of the hard decisions and leave the amount and type of cover we have to a broker or adviser. Although both may be perfectly adequate, you should always make sure you are well informed, so that you can ask the right questions about the cover you are offered, including vital questions about policy terms.

The latest life assurance gap study released by the Association for Savings & Investment South Africa (Asisa) shows that South Africans have, on average, only between four and 47 percent of the life cover they need and between 30 and 45 percent of the disability cover they need.

The average gap in cover per person is about R2.1 million per income earner and the total amount of under-insurance is a staggering R28.8 trillion. To put that figure into perspective, the researchers, True South Actuaries and Consultants, say a trillion is enough R100 notes to reach from Cape Town to Bloemfontein.

And we are not alone. All over the world, people are under-insured, according to Gareth Friedlander, the head of research and development at Discovery Life. In fact, South Africa has a reasonably mature life assurance market, in which the amount spent on life assurance as a percentage of gross domestic product is higher than it is in many countries. The problem here, Friedlander says, is that the state provides far less in terms of social security benefits, leaving a big gap in cover for many people.

There are a number of reasons people don’t take out enough insurance: they think death or disability will not happen to them; they think they cannot afford cover; or they simply don’t prioritise it among their financial commitments. Yet, many of us will experience an insurable event in our lives, and the financial implications can be far more problematic than finding the money for adequate protection.

According to Asisa, data modelling by the Actuarial Society of South Africa for 2016 showed that some 140 000 income earners – or 383 a day – were likely to die, and more than 46 000 – 127 a day – were likely to be disabled.

Another reason often given for not taking out cover is the complexity of the life assurance industry. South African life assurers are differentiated by much more than corporate colours, and knowing their strengths could help you to decide which one suits your needs. Navigating the industry is certainly complex, and your best bet is to take advice from an experienced financial adviser who has done a thorough due diligence on all the life companies and keeps abreast of their new products and benefit updates.

Ian Beere is an independent financial adviser with Netto Invest and winner of the 2007 Financial Planner of the Year Award, which is co-sponsored by Personal Finance and the Financial Planning Institute. Not only are people under-insured, he says, but many have cover that is inappropriate. Considering what you will spend on insurance over your lifetime, and the statistical reality that you are more likely to retire than claim on a policy, it is worth obtaining good advice, he says, so that you pay only for what you need and costs are contained.

With or without a financial adviser, you need some insight of your own into the available options. Below we outline the distinguishing features of each of the big-five assurers that operate in the middle- and upper-income markets, and provide you with an idea of the specialised products offered by some smaller life companies. Besides the statistics on claims ratios and complaints to the ombud for each assurer, you may be interested to know how each assurer fares when it comes to attracting new business. Auditing company PWC’s publication “Insurance through Challenging Times”, published in April 2016, shows new business flows for the three years up to 2015. Old Mutual continues to write the most new business, but Discovery has overtaken Sanlam in second position.


DISCOVERY LIFE

Discovery Life launched in September 2000, about seven years after Discovery founder Adrian Gore took over the medical scheme that was to become the first scheme under the Discovery Health brand.

Friedlander says the life company has set itself the goal of becoming the best assurer in South Africa and a powerful force for good by 2018.


Shared value

The company’s mantra is “shared value” assurance, which it delivers through its Vitality health rewards programme. Traditionally, life assurers considered the risk of your dying or being disabled, quantified it and charged you a premium for cover accordingly. Now, risk is regarded as something that can be modified positively through the right nudges, sometimes using technology, such as wearable devices, Friedlander says.

By linking the Vitality programme to its life assurance and medical scheme products, and to its short-term insurance via Vitality Drive, Discovery aims to put incentives in place to encourage you to be healthier and thereby to enhance and protect your life. This reduces claims, the reserves required by the life company and the number of policyholders who allow their policies to lapse. And it drives profits, which can be ploughed back into the business to drive further profits, Friedlander says.

You benefit by being healthier, having life cover at lower cost and receiving ongoing financial rewards. The country benefits from lower health care and motor vehicle accident costs. This is what Discovery means by “shared value”.

As a Discovery Life policyholder, you receive an upfront discount of up to 39 percent for linking your life cover, medical scheme plan and short term insurance to Vitality and agreeing to the assurer using the data the programme generates about your lifestyle. You are also eligible for a “payback” of a certain percentage of your premiums annually and for a larger percentage payback every five years, which might be as much as 50 percent of the premiums if you remain healthy. If you are unhealthy and do not engage in the programme, you lose some of the discount, but Friedlander says there is protection in place to ensure that if you fall ill – with cancer, for example – your discount is locked in. In other words, you are never penalised for getting sick. “It is definitely not about using your health data against you, but about rewarding you for positive behaviour,” he says.

Friedlander says that access to comprehensive data on your life allows the assurer to assess your risk cover more precisely and this translates into more accurate, lower premiums and more significant financial rewards over time. Policyholders are getting back, on average, 20 to 40 percent of their premiums.

Between 2006 and 2015, Discovery paid back more than R2 billion and its premium discounts amounted to R1.2 billion. The average payback per head is about 25 percent of premiums, and paybacks in total amount to 22 percent of all claims paid out, he says.

Friedlander says Discovery expects the payback figure to healthy clients to be R1 billion in 2016 and to equal what the company pays in claims within the next 10 years. This will bring about a paradigm shift in assurance, he says, because it will no longer be paying out only in the worst of times.

Although some people believe paybacks are priced into the premiums of all policyholders, Friedlander says this is a misconception; paybacks are simply a spinoff of better, healthier behaviour, which results in lower claims and lower lapse rates.

The average life expectancy for policyholders not on Vitality is 67 years, whereas it rises to 81 for policyholders on Vitality. On the highest level of the programme, Diamond status, it is a full 20 years higher than it is without Vitality: 87. Among the top two tiers of Vitality, Gold and Diamond status, men aged 60 are 14 times more likely to live to 100, and women aged 60 are 10 times more likely to reach that age, compared with the broader population in South Africa.

Last year, Discovery paid out 21 percent of the R2.8 billion it paid in life assurance claims for claims arising from unnatural deaths – mostly vehicle accidents and suicides. Consequently, the company is trying to influence the number of unnatural death claims by incentivising good driving behaviour through Vitality Drive. Ninety percent of driving deaths globally are the result of driver behaviour, Friedlander says, so the company offers a 10-percent discount if you link Vitality Drive to your life policy and a payback of 7.5 percent of your short-term insurance premiums over a year.


100-percent income protection

On its income-protection policies, Discovery ensures its benefits are best for clients who are disabled permanently, so it pays out 100 percent, rather than the usual 75 percent, of your income if, for example, you become a paraplegic.

Friedlander says Discovery Life policyholders who are also members of Discovery Health Medical Scheme can benefit from the relationship between the two. In some cases, medical scheme members with healthcare claims are unaware that they can claim on their life policies as well in certain circumstances, and Discovery Life alerts them to this when it is relevant.


Strong on multiple claims

Friedlander says Discovery has one of the strongest multiple-claim records in the market. Many assurers promise cover for multiple claims, but hide away in the fine print the fact that multiple claims cannot be made for the same condition. Discovery Life will cover multiple claims on a life policy regardless of previous claims, Friedlander says. For example, 80 percent of policyholders who make a second or subsequent claim for heart and artery treatment will have submitted their first claim for the same problem.

Last year, 17.6 percent of claimants had multiple claims and they were paid benefits amounting to R180 million, according to Friedlander.


Discovery vital statistics

Complaints to the Ombudsman for Long-term Insurance in 2015:

• Complaints received: 150

• Percentage of total cases: 2.99 percent

• Cases finalised: 129 cases

• Found in favour of the complainant: 27.1 percent

• Found in favour of the assurer: 72.9 percent

Claims statistics

• Paid in 2015: R2.8 billion

• 98 percent of all claims

• 98 percent of all death claims

• 95 percent of all lump-sum disability claims

• 98 percent of all disability income claims

• 97 percent of all severe illness claims


LIBERTY

Liberty is one of the big-five life assurers and has a track record dating back to 1957. In the past few years, it has been shaking off its old-world image and appealing to a younger market with some innovative digital tools, such as its risk analyser and claims explorer.

Nicholas van der Nest, the director of risk product innovation at Liberty, says there are three key areas where Liberty’s cover offers you good value.


Good claims payment record

Liberty publishes its claims statistics annually, so you can see the company’s good track record of paying claims. Van der Nest says Liberty was the first company to publish claims statistics, which it did for the first time in 2006. The smaller assurers generally cannot claim to have built up that kind of track record, so they cannot prove that their policies will indeed deliver on their promises, Van der Nest says.


Flexible cover

Liberty’s cover is flexible, so policies can be tailored to your needs and budget. Van der Nest says Liberty’s policy benefits meet a broad range of customer needs, but there are features that meet specific needs.


Comprehensive benefits

Van der Nest says Liberty’s benefits are designed to be market-leading, or at least comparable with what you will get from other assurers, with the exception of small specialist assurers such as AllLife (see below).

He says Liberty prides itself on developing market-first features, and its competitive offerings include:

• The first disability benefit in which disability is defined in terms of both occupation and impairment, with the benefit for impairment tiered according to the severity of the impairment.

• The most comprehensive income protection policy available in the market. Van der Nest says Liberty is one of the few assurers that offer retrenchment protection as part of its income protection policies, in addition to other benefits, such as critical illness cover and a “maternity pause” option that waives premiums while the policyholder is on maternity leave. The benefit on the income protection policy includes cover for an income beyond retirement, to allow for the cost of impairment in later years when you may be living on limited retirement savings. This is a world first, according to Van der Nest. The income protection policy also provides a guaranteed income payment on a successful claim if you provided proof of your income at the underwriting stage.

• Some unique features on life cover – the least differentiated kind of cover, generally – including one that provides for the immediate payment of a portion of your insured amount to meet the cost of urgent expenses, such as funeral arrangements.

Liberty also offers a “unique benefit” that allows a child’s schooling costs to be paid directly to an educational institution in the event that a parent passes away, Van der Nest says. This EduCator benefit provides parents with the security of knowing that their child’s education would not be compromised if they were no longer around.


Liberty vital statistics

Complaints to the Ombudsman for Long-term Insurance in 2015:

• Complaints received: 533

• Percentage of total cases: 10.62 percent

• Cases finalised: 380

• Found in favour of the complainant: 34.7 percent

• Found in favour of the assurer: 65.3 percent

Claims statistics

• Paid in 2015: R3.57 billion

• 96.1 percent of all valid claims


MOMENTUM

Momentum dates back to 1966, when Southern Life was established. In 2010, Southern Life merged with Metropolitan – an assurer with a much longer history, dating back to 1898 – to become MMI Holdings. The life assurance policies for the middle- and upper-income markets are sold under the Momentum brand – specifically, the Myriad brand.

Momentum’s head of retail insurance products, Stephen van Niekerk, says Momentum has the edge over its competitors on prices and rewards, product design, the ability to update your policy over time, and service.


Pricing and rewards

Van Niekerk says Multiply, Momentum’s wellness and rewards programme, provides discounts of up to 60 percent of your premiums if you engage actively with the programme. These savings can be used for other goals, such as saving for retirement, he says.

The Multiply programme can be linked to membership of Momentum Health, retirement savings through Momentum FundsAtWork, Momentum Myriad policies, Momentum short-term insurance policies and services obtained from Momentum Trust.

If you maintain your Myriad policies and qualifying Momentum retirement annuities until retirement, you will receive up to 15 percent of your qualifying Myriad premiums back as a tax-free lump sum or “Retirement Booster”. If you link your Retirement Booster to a Longevity Protector Benefit, you can get back as much as 45 percent of your qualifying risk premiums at no additional cost.

Van Niekerk says Momentum’s benefits are “building blocks” that enable you to create a unique, yet affordable, set of benefit combinations and premium patterns for your policy.


Product design

Van Niekerk says Momentum is continually innovating to ensure that its policies are comprehensive. It was the first assurer to offer new-generation income disability benefits that provide you with certainty about your claims. The company regards disability as the result of bodily injury or illness, functional impairment, critical illness, and hospitalisation and fractures, and pays benefits for partial claims.

Momentum Myriad also offers the most comprehensive range of income protection benefits for self-employed and employed clients, according to Van Niekerk. A comprehensive lump-sum disability benefit is paid out when occupational disability or functional impairment criteria are met, to protect you from the consequences of lost income before retirement. At retirement, you can convert the benefit to a functional protector benefit giving you cover for the rest of your life against impairment and the impact of the associated costs.

Another “world first” is Momentum’s longevity protector benefit, which was introduced in 2010 and pays out when you reach certain longevity milestones, or survive a qualifying critical illness or disability event, Van Niekerk says. This product pays out an additional lump sum equal to 10 percent of the cover amount every five years until the benefit termination date, plus an amount every five years equal to 50 percent of the income payouts over the preceding five years until the benefit expiry date, Van Niekerk says.

Momentum Myriad also offers a “unique” Last Survivor Death Benefit to cover any estate duty that will arise after the death of the longest-surviving spouse. Premiums are waived after the death of the first spouse.

Van Niekerk says Momentum tries to ensure that its benefit definitions are as comprehensive, transparent and objective as possible.

However, the real value of “a distinguished insurer can always be measured against their claims payment history”, he says, and Momentum has a repudiation rate on underwritten cover that has been consistently lower than the market average, he says. During the past decade, there has not been a single ruling against Momentum Myriad from the office of the Ombudsman for Long-term Insurance, he says.


Easy amendments

Van Niekerk says Myriad’s competitive edge is enhanced by the fact that you can amend your policy terms over time to keep your benefits up to date with the latest enhancements. These amendments are offered automatically, free of charge, or through easy policy alterations.


Momentum vital statistics

Complaints to the Ombudsman for Long-term Insurance in 2015:

• Complaints received: 315

• Percentage of total cases: 6.28 percent

• Cases finalised: 221

• Found in favour of the complainant: 33 percent

• Found in favour of the insurer: 67 percent

Claims statistics

• Paid in 2015: R3.1 billion

• 95.3 percent of all valid claims


OLD MUTUAL

Old Mutual has been writing policies since 1845 and had about 16 million customers at the end of 2015.

Jaco Gouws, the head of risk product solutions at Old Mutual, says many life companies have introduced new philosophies and value propositions over the past few years, but “personal insurance is about one thing: paying your claim. This cuts through all the clutter and noise,” he says.

Old Mutual pays out more in claims than any other life assurer: R3.99 billion in 2015. Liberty is the second-highest payer, but Gouws says Old Mutual paid out 12 percent more than Liberty, 26 percent more than Momentum and 48 percent more than Discovery.

The key features of Old Mutual’s cover include:

• Full income protection. Gouws says Old Mutual is the only assurer offering 100 percent of income protection on temporary and permanent disability, continuing for the rest of your life.

• The best severe illness protection. The quality of a severe illness product is not measured by the number of conditions that are covered, but by the quality of the definitions, Gouws says. Old Mutual’s Greenlight cover has unmatched stroke and heart definitions and the best industry payout record, Gouws says.

• Support for customers and financial planners. Old Mutual offers best-of-breed legal adviser support to policyholders at no cost. This service has a value of up to R15 000, Gouws says. Old Mutual policyholders can contact the heads and staff of departments by cellphone when they need information about underwriting, claims, medical issues and products.


Old Mutual vital statistics

Complaints to the Ombudsman for Long-term Insurance in 2015:

• Complaints received: 697

• Percentage of total cases: 13.89 percent

• Cases finalised: 348

• Found in favour of the complainant: 29.9 percent

• Found in favour of the assurer: 70.1 percent

Claims statistics

• Claims paid in 2015: R3.99 billion

• 96 percent of all claims

• 99 percent of all death claims

• 93 percent of all disability income claims

• 83 percent of all severe illness claims

• 78 percent of all lump-sum disability claims


SANLAM

The final big-five life assurer is Sanlam, which has been protecting livelihoods since 1918.

Karin Muller, the chief executive of Sanlam Risk, says financial stability, brand reputation and good- quality advice are paramount considerations when choosing a life assurance company. Beyond that, cost, policy benefits, service levels and loyalty benefits are the factors clients need to take into account when selecting cover, she says.

Muller says that Sanlam’s cover abides by the following principles:

• Proper cover. Policyholders are seen as family providers, not policyholders, and Sanlam aims to ensure that everyone who buys life assurance is properly covered, Muller says. Sanlam’s products are designed to offer cover for all the events for which people are most likely to claim, she says.

• Once covered, always covered. Sanlam’s upfront underwriting means your cover will not change even if your lifestyle, health or other circumstances change, Muller says. Sanlam does not re-evaluate the cover provided to policyholders who change jobs or take up a risky activity.

• You get what you need. Customer satisfaction surveys and needs analysis research are used to ensure that Sanlam designs the products you need – as opposed to what you think you want, Muller says.

• Sanlam looks for reasons to pay. Sanlam’s claims philosophy is to pay valid claims at all times. To offer you a satisfactory claims experience, Sanlam continuously measures itself against a benchmark set according to the feedback from its re-insurers, the Ombudsman for Long-term Insurance and the overall view of clients and intermediaries, Muller says.

In 2015, Sanlam paid claims to the value of more than R3 billion, she says. The company paid out 91 percent of all disability claims and 93 percent of income protection claims received during that period.

• Best advice and service. Sanlam believes the advice offered through its intermediaries is “best-in-class” and that the service provided revolves around you and making you feel valued, listened to and respected.


Sanlam vital statistics

Complaints to the Ombudsman for Long-term Insurance in 2015:

• Complaints received: 198

• Percentage of total cases: 3.95 percent

• Cases finalised: 130

• Found in favour of the complainant: 17.7 percent

Found in favour of the insurer: 82.3 percent

Claims statistics

• Claims paid in 2015: R3.01 billion

• 99 percent of all death claims

• 91 percent of all lump disability claims

• 81 percent of dread disease

• 92 percent of income protector

• 95 percent of sickness claims


SMALLER LIFE ASSURERS

A number of smaller assurers offer life cover to middle- and upper-income earners.

In 2005, AllLife launched the first life cover for people living with HIV. Today, it offers specialised life and disability cover for people with HIV and diabetes. Although other life companies have introduced cover for people with HIV and diabetes, they impose loadings and waiting periods. AllLife’s unique proposition is that it offers cover free of loadings and waiting periods as long as you participate in a treatment-adherence programme.

To take out cover with AllLife, you must agree to the assurer receiving information about your treatment regime and monitoring your adherence to it throughout the term of the policy. It has the right to reduce your cover to 10 percent of the assured amount if you do not stick to the treatment programme, but the assurer has enforced this rule in very few instances.

AllLife’s policies are available to a broad range of people, because it provides cover to individuals with a CD4 count as low as 200. The amount of life cover is not limited.


BrightRock launched as an innovative assurer in 2011. However, its main shareholder is the Lombard Insurance Group, which is an established player in both short-term insurance and life assurance of more than 20 years.

BrightRock has experienced huge growth in its business, and although it remains a small player, with just R100 billion of cover in force, its products may be worth considering. Its philosophy is to meet your changing needs as your life changes.

The company says it is wasteful to take out a large, single lump sum of cover that grows every year to cover your different needs – some long term, such as loss of income, and some short or medium term, such as the need to provide for debt, or for your children’s education over 20 years.

BrightRock says statistics on lump-sum disability cover illustrate the problem well. Taken out at an early age, such as 30, the cover typically increases annually to take account of inflation. As a result, the cover will increase, rather than decrease, as you age, despite the fact that your need for the lump sum will probably decrease over time. As you get older and approach retirement, your broker or financial adviser is likely to advise you to cancel some of the cover. But the cover you cancel was priced for the longer period, so some of your premiums will be wasted.

If, at a later age, you redirect the money you spent on disability cover premiums to, for example, severe illness cover, this new cover will be priced for the increased risk of severe illness at your older age.

BrightRock says if you take out cover designed to meet each need separately, you can save up to 30 percent on your premiums.

Its policies have a conversion facility that allows you to convert lump-sum disability cover to severe illness cover, for example, without medical underwriting, up to R7.5 million. You are also able to buy extra cover up to R7.5 million when your life changes.

On its severe illness products, BrightRock covers more illnesses than any other company – 318 – and it also has a trauma benefit that pays out for the consequences of events such as a motorcycle accident, a snake bite, burns, or the accidental loss of a limb. None of these events would be classified as a severe illness, and although your loss of income may be covered under a temporary income benefit, you may be out of pocket for additional medical costs.

Most life assurers offer you disability cover based on certain definitions of what constitutes functional impairment. BrightRock says this leaves some uncertainty about whether or not a disability qualifies you for a payout. For example, if you are an accountant and you lose the ability to speak, you could be regarded as still able to do your job and you might not qualify for a benefit under the functional impairment definition. So BrightRock has included a job fitness test in its definitions.


The Professional Provident Society, or PPS, has been offering cover to graduate professionals since 1941. Its unique selling point is that it is a mutual; it is not listed on the stock exchange and has no external shareholders. All the profits it makes are allocated to PPS members with qualifying PPS products on an annual basis by way of allocations to their Profit-Share Accounts; in fact, it is the only mutual in the world that distributes all its profits.

PPS says 33 percent of the premiums paid were credited to members’ Profit Share Accounts in 2015.

If you are a member, the money in your Profit-Share Accounts vests with you when you reach age 60, and if you die before that age, the money is paid out to your beneficiaries.

In 2015, PPS paid out R2.2 billion in claims, R508 million in profit-share allocations to members who retired and R69 million to the beneficiaries of members who died. Over the past 10 years, PPS has shared R21.96 billion in profits with its members.

PPS’s two-year sickness benefit and its permanent incapacity benefit cover you for your usual professional duties performed immediately before the onset of the illness or condition. For example, if you are an architect, employed as a project manager and visiting construction sites daily, you will be assessed as such and not merely as an architect.

The insurer allows members to keep their cover even if they change to an occupation that is no longer eligible for membership.

Cover is available even when members are involved in hazardous activities, such as flying and darting animals as part of your occupation or in sports, such as scuba diving and motor racing.

PPS also offers international cover, be it for travel, work, emigration or hobbies. For all of these there are no loadings or restrictions applied and no need to inform PPS of your activities.

PPS also offers cover for hazardous occupations, such as a mining engineer working underground or a wildlife veterinarian, with no loadings or restrictions applied and no need to inform PPS of specific professional duties at application stage.

Another strong feature of PPS policies is that professionals can insure themselves against the loss of their gross professional income, rather than their individual income.


WHAT A FINANCIAL ADVISER WILL TELL YOU

Financial advisers consider a range of factors when they determine which life assurance policy is best for you: the assurer’s financial security, reputation, level of service, the premiums charged and the benefits offered.

Ian Beere, an independent financial adviser with Netto Invest and the winner of the 2007 Financial Planner of the Year Award, says advisers must consider the financial security of a life assurer, its size, its balance sheet, and reputational issues, including the conduct of the assurer and cases before the Ombudsman for Long-term Insurance. Service levels are usually judged on the basis of the financial adviser’s experience.

Brigitte Tamine, a financial planner at Verso Wealth, who holds both the Certified Financial Planner accreditation and the Chartered Financial Analyst accreditation, says a question Verso Wealth considers is whether a life assurance company will consider a specific claim in the context of all the cover a client has. For example, if you claim against your dread disease policy and don’t realise that you also qualify for a temporary disability payout, will the assurer alert you to the fact that you qualify for the additional payout?

Beere says you shouldn’t consider the premiums alone when you compare policies. First, you should compare the rate at which the premium increases over time. One policy may seem cheaper than another initially, but it could be a lot more expensive over time if the premiums increase steeply.

Life companies offer different premium-increase patterns. You can take out a policy on which the premiums remain level, essentially, with both the premiums and the cover amount increasing by inflation each year.

Alternatively, premiums may be age-rated to make them more affordable initially, but much more expensive as you get older.

Between these two extremes there are some combinations – for example, stepped premiums are guaranteed for a period, then reset and guaranteed again for another period.

It is wise to ensure that your cover amount increases annually by the inflation rate, Beere says. You could be seriously disadvantaged if you face high premium increases while your cover increases at less than inflation.

When it comes to extra features, Tamine says loyalty programmes and promotional or marketing bells and whistles do not enter the equation at Verso Wealth. “We are looking for features that cover clients for unanticipated events – for example, a trauma, their children becoming sick or injured, funeral benefits and hospitalisation, in addition to the standard benefits offered,” she says.

The flexibility of the product – or the ability to amend the policy as your needs change throughout your lifetime – is also an important consideration, Tamine says.

Beere adds that cover should be flexible enough to fit your different needs, but not mind-blowingly complex. You must be able to understand the product, he says. However, the definitions should be comprehensive, because this increases the likelihood of a payout.

For example, disability is defined by three factors:

• Your occupation and duties;

• Whether you engage in any work activities that elevate your risk – for example, you’re an engineer who performs site visits; and

• How you differ from the average person.

As Beere explains:

• If you are a lawyer who sky-dives on weekends, your premiums would normally be loaded because of your hazardous pursuit. But you could consider a PPS policy that does not include a loading for engaging in a hazardous activity.

• If you are a commercial pilot, you could consider a Liberty policy, because Liberty will cover you for the loss arising from failing your medical test and being unable to fly, but not disabled.

• If you are a triathlete and travel extensively with your family, but you have a standard occupation, you could consider a Discovery policy with a rewards programme offering discounts on flights and gym membership.

At the most basic level, it is not possible for advisers to rely on standard comparisons of premiums per R1 000 of cover, because premiums are influenced by your occupation and qualifications, gender, level of income, marital status, whether or not you are a smoker and your age.

Tamine agrees, confirming that everyone has a different rating profile and is assessed as an individual. Verso Wealth prefers to generate a series of quotes that are as closely comparable as possible. Disability definitions, general and specific exclusions, and loadings are extremely important, she says. However, these are specific to you, she says. This requires a financial adviser to have a good understanding of your circumstances.

Beere says the process followed by your adviser should include the following steps:

• Calculate the amount of cover required;

• Determine the appropriate products and obtain quotes;

• Discuss whether you can afford the cover and, if necessary, adjust your budget;

• Apply for cover;

• Go for medical check-ups; and

• If the check-ups don’t find any problems, the policy will be issued.

If your medical examination raises a health issue of which you were not aware:

• The assurer will make a counter-offer with exclusions and loadings;

• You or your adviser must study the exclusions and loadings and decide whether to accept or reject them; and

• Where the exclusions and loadings are unreasonable, you may have to apply to another life assurer.

Should you diversify your life assurance, taking different types of cover from different assurers? Beere says this may have merit for large cases, depending on the circumstances. However, it is administratively more complicated and involves more paperwork when you claim, he says.

Tamine goes further, saying that diversification is impractical. Not only does it result in extra paperwork, but it puts you at risk of aggregation of your disability benefits and pre-disability earnings, to ensure that you do not receive more than 75 to 100 percent of your pre-disability earnings while disabled. The purpose of this limitation is to reduce the incentive to claim opportunistically and to incentivise policyholders to recover and return to work. Therefore, it is important to understand whether your assurer will aggregate your earnings, and therefore reduce your payout, regardless of the premiums you are paying.

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