The Link between Disability, Impairment & Counter-Offer Letters
By Franz Smit
When meeting with new clients for the first time, it's often the case that they have a skewed idea of what the insurance cover is that they currently have, what conditions or instances it will pay for, and how/what it will pay out.
The biggest issue that has cropped up in the last week has been the word "disability" and what that disability is measured on. I have already done an article on loss of licence insurance and I have also unpacked the different types of disability cover one could have (for example: own occupation, similar occupation, or loss of licence insurance), so now it's time to highlight what impairment cover is.
What is impairment cover?
People often get mixed up between disability and impairment.
In a nutshell, disability cover would evaluate your ability to do your job at claim stage.
Impairment insurance will look purely at your body or bodily function at claim stage and pays out either a percentage of the total lump sum insured, or it pays out a percentage of impairment income cover, depending on what coverage you have.
Example: You are involved in a motorbike accident one Sunday afternoon during a breakfast run and suffer severe damage to your right arm, which needs to be amputated to save your life.
Impairment would pay you out between 25%-50% as it was only one arm you lost. Own occupation disability would pay you out 100% of the amount if you needed that arm to do your job.
Have you received a counter-offer letter?
After an application for disability cover has been submitted, the insurance company could come back with a counter-offer letter which could exclude certain categories of disability on the policy and be downgraded to an impairment pay-out structure.
It can happen that clients then either don't notice these exclusions, or don't understand what the categories refer to, and are under the impression they're covered for all accidents and incidents, when they're not. If your insurance policy reads that Category C and/or D has been removed (under disability) then let me know asap as we need to rectify it.
I believe that the insurance industry needs less jargon and more transparency, and am passionate about making sure my clients fully understand all the options they have and how the insurance industry's risk cover products works, so please feel free to contact me if you are at all unsure of the status of your current insurance or would simply like someone independent to review it.
Happy landing and safe flying!
Franz Smit is the owner of www.pilotinsure.co.za and a representative of Netco Risk Management FSP no: 40265 providing independent financial advice. Franz specialises in the aviation industry.
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