A MEDICAL AID MUST SUIT YOUR NEEDS

Peter Edwards- Alexander Forbes Navigating your way through the confusing maze of medical aids starts with the selection of the scheme. Peter Edwards, managing director of Alexander Forbes Health, says this decision should include issues of stability and solvency of the scheme, and the innovation and service levels applied by the administrator of the scheme. “Preferably you’d want the solvency level to be around where the regulations require it to be, around 25% of premiums. Anything below that means that means schemes ultimately are under pressure to move to that level, and they have to price in reserve growth” says Edward. “You don’t want a scheme that’s losing a lot of money, because it would mean having to correct this position with benefit reductions and/ or significant contribution increases.” Look for stability, not a scheme that makes a lot of money one year and loses the next, or has significant changes to its options. Look at past contribution increases. This will tell you whether the scheme is stable and whether increases are introduced in a consistent manner. “Generally an indicator of stability is size. A larger medical scheme is likely to be more stable and the experience is fairly consistent, given the larger risk base. In a large scheme, one big claim or a series of big claims don’t have an impact on the scheme, unlike small schemes where it could be detrimental,” says Edward. It’s difficult for an individual who’s not directly involved in the market to assess the administrator. That’s where the financial adviser, your doctor, and family and friends come in. Another important point is governance....

LIFE, CRITICAL ILLNESS AND DISABILITY COVER SHOULD BE A FINANCIAL PLANNING PRIORITY FOR YOUNGER CLIENTS

I’m young and healthy so do I really need all this life and critical illness insurance cover? It’s a question that many young individuals often grapple with, and for the most part, many leave getting their finances in order too late. This is according to Craig Harding, managing director of Altrisk. This view is further highlighted in the 2010 Life and Disability Insurance Gap Study which shows that South Africans remain seriously underinsured. The 2010 study commissioned by the Association of Savings and Investments of South Africa (ASISA) and conducted by True South Actuaries & Consultants warns that South Africa’s income earners aged 16 to 35 would not be able to sustain their way of living even remotely based on the current insurance cover. “There’s a tendency to think that life, disability and critical illness cover is something that you worry about when you’re older- not when you’re in your 20’s and bolstered by superhero bravado. The reality is, the sooner you consider life cover the better as the cost of insurance products increase as you get older. If you’re unlucky and suffer poor health the cost of your cover will be even more expensive. There’s every reason for single people to have a life policy in place if they want to be certain that their parents or any dependants are looked after” says Harding. “Equally important, if not more so, is cover for critical illness and disability. Few individuals enjoy contemplating the emotional and financial consequences for themselves and their family if they were to contract a serious illness or become permanently disabled. What is often overlooked is...

KEEP CESSIONS AND BENEFICIARY INFORMATION UP TO DATE

Each year, thousands of life policies are ceded to financial istitutions, usually as security for a debt such as a bond, loan or overdraft.Cessions play a important role for many people in gaining access to finance, giving the lender a comfort in the knowledge that their loan will be repaid in the event of their death. Unfortunately, few people take the time to understand the implications of a cession and the impact on nominated beneficiaries, usually loved ones. Even fewer people actually cancel cessions once their debts have been paid off, leaving potentially serious implications for beneficiaries should the policyholder die or become disabled. The best person to help you with this is your financial adviser. Craig Harding, managing director of Altrisk says that policyholders need to know the ins and outs of cessions and consider all the scenarios and implications for their beneficiaries before signing on the dotted line. “The reality is that if you cede a life policy, or even a portion thereof to another party, the law provides that the cessionary will be paid before any other party. It is also not necessary for the beneficiaries to give any consent to the ceding of a policy and they may not even be aware that a cession exists. “The harsh reality is that ceding an insurance policy, for example to provide security for a loan such as a mortgage, could leave your loved ones without any source of income if you die. The cessionary will take what’s due to them first and any surplus could end up in your estatewhich could take months to settle before they...