Since October was Breast Cancer Awareness month, we will be focussing on mastering financial terms relating to healthcare in this article.
What is Income Protection and why is it beneficial? Income Protection (also referred to as ‘salary protection’) is an insurance policy that covers policyholders who are unable to earn an income due to serious illness, accidents or unemployment depending on the nature of the policy. The policy pays out a monthly tax-free ‘salary’ during a period that the policyholder is not earning an income to help cover living expenses. This type of policy is very useful for people who are self-employed and don’t have paid sick leave or people losing their jobs. Make sure to understand the policy’s conditions and exclusions.
Dread Disease Cover
Dread disease cover (also referred to as severe illness or critical illness cover) is an insurance policy that covers the policyholder in the event of being diagnosed with a specific severe illness by paying out a lump sum. The illnesses that are covered are predetermined and are listed in the insurance policy. Cancer, heart attacks and strokes are typically classified as serious illnesses. Ensure that you do understand your policy in terms of any pre-existing medical conditions; the list of illnesses that are covered and to what extent as well as the exclusions.
Prescribed Minimum Benefit (PMB)
The Medical Schemes Act refers to ‘Prescribed Minimum Benefits’ or PMB. PMB is a set of defined benefits to ensure that all medical scheme members have access to certain minimum health services, regardless of the benefit option they have selected. The aim is to provide people with continuous care to improve their health and well-being and to make healthcare more affordable. Medical schemes have to cover the costs related to the diagnosis, treatment and care of:
- any emergency medical condition;
- a limited set of 270 medical conditions (defined in the Diagnosis Treatment Pairs);
- and 25 chronic conditions (defined in the Chronic Disease List).
Health insurance (also referred to as medical insurance) is an insurance policy that pays for medical expenses incurred by the policy holder due to illness or injury. Health insurance can pay out directly to the policyholder. Health insurance policies are issued by insurers and are governed by the Long-term Insurance Act while medical aids are governed by the Council for Medical Schemes. The policy will pay out the stated amount and can assist to cover shortfalls not covered by the medical aid. Health insurance is more affordable than medical aids but provides more limited cover. It is a good idea to have health insurance in combination with a medical aid. Contributions (premiums) paid to health insurance policies are not deductible for tax purposes.
Gap cover (also known as Medical Top-Up insurance) is an insurance product that covers any shortfalls between what service providers charge for a hospital procedure or emergency surgery and what the medical aid pays from your medical scheme hospital benefit. However don’t assume that you will be covered 100% when you have gap cover in addition to your medical aid. There are certain exclusions, read the fine print of the contract.