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No jokes! That was the subject line of the email that popped into my inbox. My guess is the guy looking for the answer was in the market for some cover and had two proposals sitting in front of him. Before he could make a proper decision he needed the answer to this question. “Impairment or Disability cover. What’s the difference?” After I typed up a mail back to him it occurred to me that I should use his question as a blog post and slap the answer into cyber space (For all the other insurance info seeking guys & girls out there).

Impairment & Disability cover are generally marketed as two separate benefits but you can find impairment definitions in your disability benefit (if you look hard enough) and when it comes to claim stage it’s all about the definitions in your policy document so it’s a good move to familiarize yourself with them. That I can guarantee you…

So lets have a closer look.

Disability Cover (The comprehensive type)

If its the comprehensive type you are after ( and that’s the only type I would ever recommend taking out) it’s going to pay out when you are permanently disabled and unable to perform the functions of your job. The really important bits of that particular sentence are (permanent disability and unable to do your job). That’s the first definition in your disability policy wording that’s going to trigger a pay-out at claim stage . “Is this claimant permanently disabled and unable to fulfill the duties of his/her job?” That’s the question the claims assessor is going to be asking. And if the answer to that question is “Yes” expect a pay-out equal to 100% of your sum insured. That means if you’ve got R1 000 000 comprehensive disability cover in place expect a R1 000 000 pay-out. Easy enough.

“But what happens if my life insurer is unable to make a determination based on that specific claim definition?”

“Let’s say I lose the sight in my right eye from a car accident but I’m still able to continue working? My disability is permanent but hasn’t rendered me completely unable to perform the functions of my job. Under the definition you just described above I guess I don’t get a pay-out?”

That’s a very good question.

If that was the only definition under your disability benefit that triggered a claim pay-out then yes you wouldn’t receive a pay-out. The good news is that it’s not the only definition to trigger a pay-out. Comprehensive disability benefits also pay under various impairment definitions.

“Hold on. Are you saying comprehensive disability benefits also included impairment benefits?”

Yip, that’s exactly right.

And the impairment definitions & claim trigger events are normally covered under two impairment sections:

Impairment Cover

1) Core Impairment – Covers impairments of a less severe nature
2) Comprehensive Impairment – Covers impairments of a more severe nature.

Ok, so what type of impairments are actually covered?

This might change from one life insurer to the next but generally these are the events covered.

Core Impairment

Loss of Limbs
Loss of Eye Sight
Loss of Hearing
Loss of Speech
Activities of Daily Living

NB: % of pay-outs will vary depending on the severity of the impairment

Comprehensive Impairment

Respiratory System
Digestive System
Cancer
Mental Disorders

Endocrine System

Musculoskeletal System

Nervous System

Aids

NB: % of pay-outs will vary depending on the severity of the impairment

Now let’s take a quick look at the Altrisk Comprehensive Disability Benefit policy wording to see an example of an impairment event covered. The reason why I want to point this out is to better illustrate how a life insurer would handle a less severe disability claim and end up paying it from the impairment definitions.

Loss Of Sight In One Eye

Total and irreversible loss of sight in one eye. Permanent visual acuity impairment (not correctable by operation) resulting in a Snellen rating of less than 20/200 or worse. The blindness must be certified through an Opthamologists report and cataracts are specifically excluded.

Benefit: 25% of the sum insured.

Lets look at your example earlier in the post. “What if I lost my eye but I could still work?”. Its clear that the first claim payment definition couldn’t trigger a payment because you are still able to work. The impairment definition has however covered you in this particular instance. If you had R1000 000 in cover this event triggers a 25% sum insured pay-out which would equate to R250 000.

So this is what you need to remember if you are comparing a comprehensive disability and impairment benefit.

1) A comprehensive disability benefit is always going to look to pay-out under the definition “Is this person permanently disabled and unable to perform the functions of his job?”. Failing that your disability will fall under either a list of core or comprehensive impairment definitions and based on the severity of the impairment your claim payment will be a % of your sum insured. So you are covered for both. Permanent disability and partial impairment.

2) If you only opt for an impairment benefit (whether it’s a core or comprehensive offering) you aren’t going to have the protection of the “Is this person permanently disabled and unable to perform the functions of his job?” definition. All you will have is a list of impairment definitions you will be covered for. Again, depending on the severity of the impairment your claim will be a % of your sum insured.

Comprehensive disability cover really is the better choice but if you cant qualify for the benefit or your budget doesn’t allow for the premium only a comprehensive impairment benefit offering could partially come close.

King regards,

The InsuranceFundi Team

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