Gap cover has traditionally been offered as individual or family options, but clients do not always fit neatly into these categories. A single professional, a couple without children or a single parent with one child will have different needs and budgets, and these can change over time.
As gap cover becomes more flexible, advisers have more options to recommend cover based on the client’s age, household, medical aid and budget. According to James White, Sales and Marketing Director at Turnberry, this shift is changing the way advisers approach recommendations.
“With gap cover offerings becoming less generic, advice needs to become more tailored too,” says White. “It’s about considering what the client needs at that point in their life and how those needs may change over time.”
Start with what the client needs
With gap cover options now offering greater choice, advisers need to take more of the client’s circumstances into account when recommending the right cover. A single client or couple without children, for example, may not need to pay a family rate, while someone with several dependants may be better suited to a traditional family option.
“The starting point should always be the client’s individual circumstances,” says White. “Not every client needs the same type of cover, and having more options available means advisers can better align recommendations to a client’s household structure, medical aid and budget.”
Age can make a difference too. Pricing based on age and the number of dependants allows the premium to reflect both the client’s stage of life and the number of people who need cover. Turnberry’s Dynamic option, for example, has four age bands, with premiums varying according to age and the number of dependants on the policy.
However, price is only one part of the conversation. Advisers also need to consider the client’s medical aid and the medical expense shortfalls they could face. A lower premium may come with less cover, so the client needs to understand what they are covered for and where they could still have to pay out of pocket.
“Affordability is important, but it should be balanced against the level of cover being provided,” says White. “Clients need to understand both the benefits they have and the potential shortfalls they may still be exposed to.”
More choice needs clear advice
Having more options available also means there is more for clients to understand. Two gap cover options may differ in the benefits they provide, the limits that apply and the shortfalls they cover, and these differences are not always obvious.
Advisers therefore play a crucial role in helping clients understand not only what they are covered for, but also where limits or exclusions apply and what shortfalls they might be exposed to.
“More choice is positive for clients, but it also places greater importance on advice,” says White. “The differences between options need to be explained in practical terms so that clients understand what they are choosing and why one option may suit their circumstances better than another.”
Medical aid also needs to form part of that conversation. Co-payments, sub-limits, Designated Service Provider (DSP) requirements and the rates medical schemes pay can all affect the shortfalls a client may face. Looking at the medical aid and gap cover together gives the client a clearer picture of where they are covered and where they may still be exposed.
“Gap cover should not be viewed in isolation,” White explains. “When advisers consider a client’s medical aid alongside their gap cover, they can better identify potential areas of exposure and help clients make more informed decisions.”
Tailoring advice to the client and the cover
More flexible gap cover gives advisers more options to match cover to the individual client, but the advice should not stop once that cover is in place. A client may add a partner or dependant, change medical aid options or experience a change in their financial circumstances. Gap cover can often be adjusted during the year, so these changes can be accommodated without having to wait for an annual window.
“Clients’ needs can change quite quickly,” says White. “The ability to adjust cover during the year means advisers can help ensure that a client’s cover continues to reflect their circumstances as those circumstances evolve.”
Healthcare is also changing. New medicines, treatments and technologies can affect the cost of care and the shortfalls clients face, while changes to medical aid benefits can alter what is covered. This makes reviewing gap cover alongside medical aid an important part of ensuring that the client continues to have the level of protection they need.
“Regular reviews remain an important part of the advice process,” says White. “Changes to medical aids, healthcare costs and a client’s personal circumstances can all affect whether their current cover remains appropriate.”
Flexibility does not have to make gap cover advice more complicated. Instead, it gives advisers more opportunities to tailor cover to the client, both when they first take it out and as their needs change over time.
As White concludes, “The value of flexibility is that it allows advisers to match cover more closely to the client’s needs. With regular reviews, advisers can help ensure that the cover continues to meet those needs as life changes.”