Understanding your disability cover is imperative if you want to avoid disappointment at the point of claiming, when you are at your most vulnerable. Getting your head around how life assurers define disability can be tricky.

Ferdi Booysen, manager of risk products at Old Mutual, says disability is an umbrella term, covering impairments, limitations on the activities you can do, and restrictions on your participation
in life situations.
He explains: “An impairment is a problem in body function or structure, for example a heart condition. An activity limitation is a difficulty encountered in executing a task or action, such
as eating or dressing yourself. A participation restriction is a problem experienced in a life situation – for example, working.”
Disability definitions that are based on participation restrictions are typically known as occupational disability definitions (see “Occupational disability definitions”).
You can get cover for disability defined in terms of any one of these three ways orcombination cover for disabilities identified in terms of all three definitions. Understanding the type of cover you have will go a long way towards preventing disappointment when you
submit a claim.
According to the Association for Savings & Investment South Africa (Asisa), “benefits that only include medical definitions [for impairments] will not provide the comprehensive
protection offered by benefits that include the medical definitions in combination with an occupational definition”.
If you have cover for disability defined only in terms of an occupational definition, you may be unable to claim for a particular impairment, depending on the work you do.
A clerical worker, for example, may be unable to claim for a hearing disability on a policy that defines disability in terms of inability to do your own or similar job, but may be able to claim under a policy that defines disability in terms of impairment.
You may have disability cover as an employee benefit, but you need to check what is covered and on what terms.
Disability cover is provided in the form of a once-off lump-sum benefit or an ongoing income benefit.
Lump-sum benefits are specified when you take out your policy and may grow on an annual basis at an escalation rate selected by you. Disability income benefits are typically related to your monthly earnings when you take out your policy, but may also escalate annually, and pay out until a selected retirement age.
Income benefits were traditionally paid until your expected retirement age, typically 60 or 65. But with people living longer and having to work until they are older, many insurers now
offer income benefits that are paid until the age of 70.
A problem you may encounter when you claim on a lump-sum benefit policy is that these benefits are typically only paid out when you are permanently disabled, whereas income benefits can provide for both temporary and permanent disability, Booysen says.
Proving that your disability is permanent may take time.
If your disability is one from which you may recover, the processing of your claim may be delayed while the assurer waits to see if medical treatment will bring about an improvement
in your impairment, ability to do a job or to do daily activities.Policies that pay income benefits often offer both temporary cover and permanent cover.
“Temporary cover only pays out for a temporary period,” says certified financial planner ,Catherine Currie. “This makes it affordable. Once the claims start to pay, they only pay for a
certain period such as six, 12 or 24 months.”
Temporary cover is vital for self-employed people who don’t enjoy the benefit of paid sick leave, and who can suffer loss of earnings as a result of disability. Temporary cover benefits may be paid for a disability from which you will recover or for a disability which is later confirmed as permanent. If your disability is not permanent – for example, if you are a tour guide and had a knee replacement and could not drive for six weeks – you would not be able to claim on a policy that offers cover only for permanent disability.
Disability benefits are typically also subject to waiting periods – periods after disability started and during which benefits are not paid. The longer the waiting period, the cheaper the premium.
Currie says you can have waiting periods of seven days, one month, three months, six months, 12 or even 24 months.
Asisa cautions that when choosing the waiting period on your policy, you must consider how long you can be off work without losing an income. Many salaried employees have at least 30 days sick leave and will only experience a loss of income after being disabled and unable to work for more than a month.
If you are entitled to sick leave, you could select a one-month waiting period on your policy which means it will only start paying in the event of you being off work for more than a month.
Lump-sum disability policies usually don’t have waiting periods, but some companies have a six-month waiting period to establish whether the disability is permanent. You also need to follow all reasonable medical advice and undergo reasonable treatment “until the maximum medical improvement is achieved”, Booysen says.
Aggregation of benefits: how you can be over-insured
Many people make the mistake of over-insuring themselves when they take out disability cover, Ferdi Booysen, manager of risk products at Old Mutual, says.
Booysen says this happens when you buy too much cover from one life company or when you buy too much cover from multiple companies. You should not be enriched – or financially better off – as a result of disability, and for this reason you should never be paid out more than 100 percent of your income.
The life assurance industry ensures this by a process of aggregation. Aggregation effectively combines all your disability benefits as well as your post-disability income to ensure that you do not receive more than 75 to 100 percent of your pre-disability earnings while
disabled. The rationale is to limit the incentive for opportunistic clients to claim. “This was done to provide an incentive for clients to go for rehabilitation, recover and return to work, since they earn more by being at work,” Booysen says.
He says nowadays you can insure 100 percent of your income against temporary and permanent disability.
Assurers typically offer cover for 100 percent of your income when you need temporary cover, as this is often when your income needs are highest.
Income benefits at 100 percent of your pre-disability income are also available to you if your disability proves to be permanent.
The Association for Savings & Investment SA outlines the various types of aggregation:
* Aggregation with disability benefits provided by a number of insurers: insurers will reduce
their payments proportionately to ensure the sum of all payments does not exceed the
agreed percentage of pre-disability earnings to be replaced.
* Aggregation with lump-sum disability benefits: some insurers may aggregate your income
benefits with your lump-sum benefits. This is done by converting your lump sum to a
monthly amount depending on your age at disability and expected duration to retirement
and adding this to your disability income benefit to ensure income does not exceed the
agreed percentage of your pre-disability monthly earnings.
* Aggregation with group risk benefits: if you are a salaried employee you probably belong
to a group scheme which provides between 60 and 75 percent of pre-disability earnings on
a disability event. If you buy additional income benefits, you need to understand how the
two dovetail. Aggregation will usually result in reduced benefits being paid. However, it is
important to know whether your employer’s group risk scheme allows for a continuation of
cover should you leave your employer. If not, there may be good reason to have additional
cover in your own capacity, even if there is some element of over-insurance.
Certified financial planner Catherine Currie says most people who have group benefits are
sufficiently covered. “However, I always suggest that clients have some cover in their
individual capacity, even if this results in them being over-insured for a period, because it is
rare for people to remain attached to one scheme/employer their entire lives. The older you
get, the more expensive the cover is.
“It is also advisable to contract for this cover while you are healthy or before the onset of
any condition (such as diabetes) that results in cover being forever denied or where a
condition may result in certain events being excluded.”
* Aggregation with post-disability earnings: often disability does not lead to full loss of
income; you may continue to earn a partial income if partially disabled. You need to
understand how post-disability income will be treated by your insurer.
* No aggregation: sickness benefits are usually not aggregated against post-disability
earnings or disability benefits from other insurers.
Occupational disability definitions
The Association for Savings & Investment SA says the most common occupational disability
definitions are:
* Own occupation – this measures your ability to perform your particular occupation;
* Own or any reasonable alternative occupation – this definition measures your ability to
perform any occupation for which you are reasonably qualified, based on your training,
education and experience; and
* Any occupation – this definition measures your ability to perform any occupation
irrespective of your training, education and experience. This is the strictest definition; you
need to be severely disabled to qualify for benefits under this definition.