A popular type of insurance among South Africans, that is often confused with the medical aid hospital plan only, is the cash back plan. It protects a person against the financial implications of being in hospital by paying out cash for each day in hospital. These cash back plans are not medical aids. It was not intended to replace a medical aid and there should be no choice between either a medical aid or cash back plan. Both financial products are different and the hospital cash back plan is essentially the predecessor of the medical aid cover that we know of today. However, this should not detract from the fact that the hospital cash back plan is a helpful form of cover when you need it most – lying incapacitated in a hospital with the personal bills piling up.
About the Hospital Cash Back Plan
A hospital plan in South Africa offering payouts for each day in hospital is know as a hospital cash back plan. The name of this type of insurance policy pretty much says it all. You receive a cash sum for each day that you are hospitalised which is money that you can use for any purpose that you wish. A hospital cash back plan does not pay the hospital nor does it reimburse the doctor. This is the function of a medical aid. A hospital cash back plan does not top up your outstanding medical expenses beyond the medical aid pay out. This is the function of gap cover. As confusing as it all may seem, it is fairly simple – a hospital cash back plan protects you against the loss of income and personal expenses incurred while you are in hospital. A medical aid takes care of your health care bills.
Reasons for Cash Back Plans
It is true that you can use your hospital cash back plan to pay off some of your medical expenses. This is your perogative but do not expect the doctor or hospital to not demand a cash payment upfront since a hospital cash back plan is not a medical aid. So what is truly the purpose of a hospital cash back plan? Consider this – if you are employed then you get a set number of sick days off per 3 year cycle. In South Africa this means that you will still get paid although you cannot go to work. Once you finish your quota of sick days though, you will have to take unpaid leave. This means that you employer may not be able to fire you but at the same time you will not be receiving your salary for those days.
Employee or Businessperson
Should you be hospitalised for a month, this means zero salary for the month. Although you cannot work, the bills do not stop. You need to take care of your family even though you are ‘comfortable’ in hospital. This is where the hospital cash back plan comes in. It protects you against this loss of income. It is even more significant if you are a business owner or self employed professional as your business stops from th every day you are in hospital. Even if you do not need the payout for your personal expenses, you may have employees who need to be paid, rent on your office that will be due and all the other associated expenses. The benefit of a hospital cash back plan is therefore obvious to any person.
Benefits and Cost
The payout of a hospital cash back plan depends on the level of cover you purchase as is the case with any insurance policy. If you buy higher cover then you will receive a higher payout and of course pay a higher monthly contribution for it. Hospital cash back plans in South Africa start from as little as R100 per month which is just R4 a day. Most plans pay between R3,000 to R5,000 per month depending on the level of cover you choose and there are premium plans available with high payouts. Make sure that you understand the costs of these plans because it is meant to be a long term commitment and you need to be able to afford it over years.
Also take the time to understand the nature of the cover and read the fine print. If you are not very proficient in these matters, speak to a broker. You need to understand what is meant by deferred period, waiting period, pre-existing conditions and exclusions. Simply, deferred period is the the number of days for which you need to be in hospital before you qualify for a payout. Waiting period is the number of months for which you have to be a fully paid member before you can make a claim. Pre-existing condition is any ailment that you had prior to the start of cover and exclusions are conditions for which you will not be paid.
Understand these terms. It makes a difference in the costs of your policy and benefits which you will only appreciate when it is time to claim.