Aviation Insurance Disability vs. Dread Disea
By Franz Smit
Disability insurance is important in that it covers your ability to earn an income, or rather, your inability to earn an income or perform your job function, should you become disabled or impaired. (Please see previous articles for an in-depth discussion on these differences and subtleties.)
Dread disease, however, insures you for suffering a dreaded disease. There are way too many examples to mention but the top three are heart attacks, cancer, and strokes.
I want to give you a few examples of why it is important to have both, and not to always give one more preference over the other.
Client has a heart attack - it is a mild heart attack and he is back at work four months later.
Capital Disability won't pay out as it has not left him/her unable to permanently perform their occupation, whereas Dread Disease (depending on company and option) will most likely pay out in full.
Client has a severe heart attack, and the doctor is of the opinion that the stress factors related to the client's occupation could very likely cause him to have another heart attack. The client can also no longer work a similar job and definitely not do his exact job.
Generally, in such a case, both Disability and Dread Disease will pay out. (This is dependent on which company your insurance cover is with and if the policy is structured correctly).
Client has an accident where he breaks his back. Recovery time to walking unassisted is 24 months with no chance of full mobility. This is a classic scenario which could affect a pilot.
A Disability claim would most likely pay out, but not Dread Disease.
Client has engine failure while flying, does a forced landing and breaks their back. They also sustain serious burn wounds from the post-impact fire.
In a case like this, both Disability and Dread Disease would be applicable cover to have and would most likely both pay out.
These are just a few short examples and there could be hundreds of scenarios here, but hopefully this gives you a to-the-point understanding of the difference between the two and why it's important to have both types of cover.
Important update on Income Disability: Read THIS
Your premium towards your income disability benefit is no longer tax deductible as of 01/03/2015, but then again, at claim stage, the income you received will no longer be taxed either. ?
As always, I welcome your comments and questions regarding your personal insurance
May you only experience AVOC conditions this month!
These example scenarios above are for illustrative purposes only, and do not constitute financial advice. Each individual claim case is different, and the outcome would depend on many variable factors, for e.g. which company your insurance policy is with, what they cover, and how the risk cover is structured.
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