Moonstone Information Refinery – Feature

With numerous life insurers offering a wide range of benefits, finding the best products for your clients can be challenging. After completing a thorough financial needs analysis, the next step is a comparison of the available products to single out the best solutions. This goes beyond comparing prices; it means ensuring that the products meet your client’s real needs and risks, according to Mark Neil, the chief distribution officer at Bidvest Life.

When comparing quotes and differentiating which life insurer has the most comprehensive cover that meet their clients’ expectations, financial advisers should ask themselves questions about the product features they might not previously have considered, Neil says

These questions include:

Who qualifies for a seven-day waiting period?

In 2023, 42% of the income protection claims that Bidvest Life paid on a seven-day waiting period were for disability that lasted 30 days or less. This means that 42% of the claims would not have resulted in a claim if the life insured had selected a 30-day waiting period, Neil says.

He says advisers should consider how their clients earn their income. Do they qualify for a seven-day waiting period whether they own a business, are self-employed, are employed in a traditional structure, are independent contract workers, or earn a commission?

Are common cancer risks covered?

One in 26 South African women will experience breast cancer in their lifetime, according to the Cancer Association of South Africa (CANSA). Neil says advisers should check whether the product provides comprehensive cover for breast and cervical cancers and find out whether breast reconstruction is included.

One in 15 men have a lifetime risk for prostate cancer, according to CANSA, but most insurers only start paying from stage 2 (T2) or T1 if the Gleason Score is more than 7. A product that pays from stage 1 (T1a) and does not require a Gleason Score as part of its definition ensures that a client’s real risks are covered, Neil says.

Does the product address critical illness shortfalls?

Traditionally, income protection does not cope well with the intermittent periods of disability commonly caused by critical illnesses. Claims on most temporary income protection benefits are triggered by occupational disability, which means they terminate when the person is deemed fit to return to work, Neil says.

A client who is diagnosed with cancer and is undergoing intermittent treatment will receive only a portion of their income if they continue to work part-time during this time. In most cases, this will leave them unable to take time off for mental and emotional recuperation, Neil says.

In addition, the payout on income protection does not cover unexpected additional monthly expenses such as changes to diet, specific medication, and travelling to and from treatments.

Neil says a benefit such as critical illness income (CI income) will meet a client’s needs. This benefit guarantees uninterrupted monthly payments for up to 12 months on diagnosis irrespective of whether the client continues working during treatment.

For example, “Nandi” was diagnosed with Stage 3 breast cancer and underwent a double mastectomy and breast reconstruction. Her policy provides her with three benefits so that she can focus on her recovery instead of worrying about lost income: a lump-sum payment of 100% of her sum assured on diagnosis; a monthly income for the 12 months post-diagnosis through her CI income benefit; and an additional 15% payout on her critical illness lump sum benefit (over and above the 100% of benefit already paid) specifically for her reconstructive surgery.

Is there a commutation option?

Many people view lump-sum disability and income protection as substitute benefits – if you take enough lump-sum disability cover, you don’t need income protection, and vice versa.

Neil says this view is inaccurate because income protection benefits pay out for both temporary disabilities and permanent disabilities, whereas lump-sum disability cover pays out only for permanent disabilities.

The ability to add a commutation option (which enables clients to commute a portion of their monthly payout into a once-off lump sum on permanent disability) to an extended income protection policy will ensure that the policyholder is covered for temporary and permanent impairments, but still has access to a once-off lump sum in the event of a permanent disability, Neil says.

Are children covered?

When a child is diagnosed with a serious illness or disability, it exacts a massive emotional toll on the family, not to mention the financial burden that accompanies a critical illness diagnosis.

A critical illness policy that automatically covers a policyholder’s children will assist with the additional costs required to provide for the needs of these children during this difficult time. Policyholders should also have the option to add life cover for their children – and their spouses – to their lump-sum benefit.

Does the product provide for dependants in the long-term?

Traditionally, life insurance pays out a lump sum on death. Although lump sums are ideal for settling once-off commitments – such as debt, executors’ fees and estate duties – they are not without risk. Calculating a lump-sum amount is subject to assumption-based risks, and behavioural risks after payout cannot be safeguarded against.

Neil says a life income benefit provides nominated beneficiaries with a monthly income stream, ensuring that a client’s family has a consistent source of financial support after the client’s death.

Are changing circumstances allowed for?

Automatic future insurability benefits provide a degree of flexibility because a client’s insurance needs change. The drawback is that these benefits may not necessarily align with the timing of the changing needs, leaving your client vulnerable to gaps in their cover.

A product such as Future Cover Protector ensures that a client who anticipates significant changes in their insurance requirements at specific points in time, independent of policy anniversaries or life events, can make the necessary updates and additions free of medical underwriting, Neil says.

Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies.