Shreekanth Sing, Technical Legal Adviser, PSG Wealth
The average life expectancy in South Africa is among the lowest in the world at 49.7 years. Once you reach the age of 65 years, however, your life expectancy soars to 90. Thanks to improving medical technology, many people are living longer. This also means there is an increased likelihood that at some point, we will encounter a debilitating illness like cancer, heart disease or a stroke that could have a lifelong impact not only on our health, but also on our wealth.
Planning poorly for your health could mean that you need to fund a medical shortfall from other sources (such as your savings or retirement capital), losing your income for a period of time, or both. There are three key considerations in planning holistically for your health to make sure you can go the distance, no matter what.
Select the right medical aid, ensuring it suits your needs. While affordability is a key driver of option selection for many of us, the wide variety of options can follow widely different structures. Selecting the most appropriate plan from all the available options is essential, as most schemes only allow you to change options once a year. Important to consider are your day-to-day benefits, Prescribed Minimum Benefits and hospital cover. Understanding these matched to your needs and, if applicable, to those of any dependents you may have, is the place to start. It is also a good idea to consult an adviser who is accredited with the Council for Medical Schemes to assist.
Consider the gaps. Reducing your overall costs when selecting your medical aid plan is tempting, but you need to consider the gaps in what is covered by the plan you choose. Often, general practitioners and specialists charge higher rates than what medical aid covers and you need to consider how to fund such shortfalls without putting yourself under financial strain. These additional costs could potentially run into tens of thousands of rands (for example, if you are involved in an accident). Gap cover policies help to fund the shortfall between what your medical scheme pays and what the specialists and doctors charge. Certain gap cover plans will pay up to five times or 500% of what your medical scheme has paid, with an overall limit of R150 000 per insured person per annum. Cover is typically restricted to in-hospital procedures, but some out-patient services are also covered.
Ensuring you have a safety net in place is the final piece of the puzzle in planning your long-term financial health. Unforeseen events like rehabilitation after a stroke or cancer treatment can result in a need for specialised care and catering for a loss of income, if you are not able to continue working while undergoing treatment. Dread disease (severe illness cover) and income protection policies can help you bridge this gap and ensure that you have access to funds to cover the specialised care needed and to cover basic living expenses while you recover.
Not taking a holistic approach when considering your long-term health could have disastrous financial consequences for you and your family, and could jeopardise your ability to ensure sufficient retirement funding. Prevention is most certainly better than cure.