You would be correct in thinking that if you are physically impaired, you are somewhat “disabled”. That would lead you to believe that disability and impairment cover are the same. Not exactly. When it comes to insurance, it’s all about the definitions and disability cover is very different to impairment cover in its definition. You need to know the difference before signing up for either policy.
Simply put – the difference between disability cover and impairment cover is this:
A disability cover pay-out hinges on your ability to work and earn a living. If you are permanently disabled and cannot work because of illness or injury, you have a claim under a disability policy. That definition can be broadened even further.
“Own occupation” disability cover means you are covered for your own occupation. If you are permanently disabled and cannot perform the functions of your nominated occupation, you have a claim. This is the best option because it doesn’t leave any uncertainty. If you are a surgeon and you are permanently disabled and want to claim, the insurer cannot argue that you could perform another occupation.
“Own or similar occupation” disability cover means at claim stage the insurer could argue that you can work in another job similar to yours, based on your skills, education and training.
The definitions are miles apart although it’s easy to throw them under one “disability” banner.
If you can afford it, go with a disability benefit that covers you for your “own occupation”. There is nothing wrong with a policy that covers “Own or similar”, but just be aware of the definition.
Ok, onto impairment cover.
An impairment cover pay-out isn’t defined by your ability to work. It’s defined by a list of specified physical impairments in your policy. The cover amounts can vary from one insurer to the next, but you can expect sums insured of between R100,000 all the way up to R4,000 000. Physical impairment policies are designed to create positive cash-flow that could be used for several different reasons:
- You might want to build a ramp for your wheelchair
- You might need to cover the costs of a care worker
- You might need the money for a prosthesis
The one thing you need to be aware of when taking out physical impairment cover is that the pay-outs can be tiered based on the severity of your physical impairment.
- If you have a severe physical impairment expect a 100% pay-out
- If your physical impairment is less severe, you could expect a pay out of 30% – 60%
Should you opt for disability cover or physical impairment?
That’s going to come down to your personal situation, how much you can afford, and what do you ultimately quality for.
If you aren’t employed, then disability cover isn’t an option because as we mentioned earlier in the article, the definition around disability comes down to your ability to perform the functions of your job. You can’t perform the functions of your job, if you don’t have a job
Other factors to consider are the following:
- Exactly what types of physical impairments are covered?
- What is defined as a severe physical impairment? Remember that’s when you can expect a 100% pay-out.
- Are your comfortable with a definition that states you need to be permanently disabled to get a pay-out? Or would you prefer a policy that pays out something if you lose a finger but could still work?
Just about all our decisions come down to price, right? We would all like to belong to the most comprehensive medical aid in the country, drive the latest BMW and live in a mansion down in Camps Bay.
Unfortunately our affordability pulls the handbrake up on some of our wants and wishes. Insurance is no different in this regard.
Work out what you can comfortably afford to spend on a “disability” policy. You now know what the difference is between a disability and physical impairment policy when it comes to the definitions.
Make sure you get the best product your money can buy.
Until next time
The Wise About Life Team