Understanding insurance waiting periods

Considering the consequences of a serious illness or disability is never a pleasant exercise and can be difficult to think about objectively. This is one of the reasons why a professional financial advisor plays such an invaluable role.

Without the guidance of an objective financial planner, it’s easy to overlook potential critical illness diagnoses that have a seemingly low probability, but can wreak havoc on your finances.

Unfortunately, many people forget – or don’t know about – the various waiting and survival periods relevant to different critical illness and disability cover products.

Benefits such as critical illness, impairment, disability and income replacement cover are vital components of a comprehensive long-term insurance portfolio. But even with comprehensive cover in place, you should factor in the impact that waiting and survival periods can have on your financial well-being in the time between diagnosis and claim pay out,” explains Andre Froneman, product specialist at Altrisk.
“What many people don’t realise is that, in addition to predefined waiting or survival periods, the claims process can take time based on a number of variables. These include the nature of the policy, the reason for the claim, the need for medical tests to be conducted to confirm diagnosis, and the wait for medical test results. These can sometimes delay a claim payout, during which time you may not be receiving an income. This is particularly true for the self-employed, who may not have access to comprehensive employee benefits and paid sick leave,” he adds.  
Defining waiting periods

So what are waiting and survival periods? And what are some of the other intervals that can be experienced at the claim stage? According to the definitions of the Association for Savings and Investments South Africa (ASISA), lifestyle and income protection cover may be subject to the following:

  • Waiting period: This is the period of time that must pass before your cover comes into effect. During this time you are unable to claim. For example, if you have a waiting period applied for spinal injuries, you would be unable to claim for this condition until the waiting period had passed. This is to prevent people applying for cover when they know that they are likely to claim in the near future. Waiting periods may vary depending on the benefit. For example, a critical illness benefit may specify a waiting period only for certain diseases. It is important to note that these are not standardised across insurers, so it is essential that your financial advisor is familiar with the waiting periods applicable and can guide you in this regard.
  • Survival period: This refers to the period that you must survive from the time of claim, before it will be paid. The survival period ensures that the benefit financially assists you while you are still alive, as critical illness and disability products are not designed to pay a benefit on death. A typical survival period is between 14 and 28 days.
  • Elimination period: This is the time between the date that an illness or disability begins and the beginning of the benefit payment. It is used to prevent short term disability or illness clams. Elimination periods are common for critical illness and disability income benefits and are generally between 14 and 28 days for critical illness products; and one, two or six months for lump sum disability products.
  • Off period: Off periods only apply to disability cover. This would be applied if you were to claim against a disability income benefit and then need to do so again after returning to work and becoming ill or having your health deteriorate once more. When assessing the second claim, the insurer may deem that the relapse has occurred during the off period, in which case you will not need to wait for a second elimination period to pass.  

“Regardless of the critical illness or disability product that you choose or the waiting period applied, it is essential to analyse your personal circumstances and cover from all angles,” concludes Andre.

(Press release from Teresa Settas Communications, February 2013)

(Picture: insurance concept from Shutterstock)

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