Critical Illness Insurance Guide

Critical illness insurance is a living benefits policy that pays a benefit to the person who owns the policy, as opposed to their beneficiaries.

This is insurance that provides owners with a lump sum of money if they experience a critical illness that is covered under their critical illness policy.  Common covered illnesses are heart attack, stroke and cancer, but up to 30 conditions can be covered depending on the insurance company and the contract chosen.  The policy definitions determine when a claim is paid for.

The lump sum is generally paid 30 days after a covered condition.  Once the lump sum payment has been made, the policy is generally terminated.

Should I get Disability Insurance or Critical Illness Insurance?

I would generally have a client get a disability insurance policy before getting a critical illness policy.  That is because disability policies cover more conditions than a critical illness policy such as any illness that causes a disability, and accidents.  Also the total benefits of a disability policy tend to be greater over time than with a critical illness policy.  A disability policy can pay for several different conditions over ones working lifetime as a disability does not terminate the policy.  But not everyone can qualify for a disability policy as they may not be employed, or their occupation may not be covered.  In that case critical illness coverage can be a good second choice.

Critical illness coverage has a different role than disability insurance, and many people, including myself, choose to carry some of both.  Critical illness insurance was actually created by a heart surgeon who was discouraged to see that he could save people’s lives, but not protect them from the financial devastation that something like a heart attack created.  Staying on that subject, if one had a heart attack, which would be more useful

  1. A monthly benefit check which in the case of a heart attack might only pay for months until one is deemed fit to work again?
  2. Or $100,000 or so as a lump sum so that one had time to assess one’s situation and life, make whatever changes might be necessary, and get back to a productive life on one’s own terms?

 

So I consider critical illness insurance an important form of insurance in its own right.

The benefit that critical illness insurance coverage offers an insured and their family is financial security in an already challenging time when a critical illness strikes.  When you are suffering from a critical illness it is not only the physical strain that becomes draining, but the financial strain too.

When an insured gets their critical illness payment they can spend the money as they wish, and where it is most needed. The payment could go towards in-home nursing care, treatment not covered by your health insurance, or to pay bills that are falling behind due to the lost wages from work.

Anyone can experience an unexpected critical illness, and when it occurs it can turn your life upside-down.

Each year in Canada alone there are over 70,000 heart attacks, well over 40,000 strokes, and over 3,000 people diagnosed with cancer each week.

These examples are just a small fraction of issues covered under critical illness insurance. This safeguard insurance can be purchased independently, or in conjunction with term or life insurance. These extra financial resources can be used to:

  • Pay for co-pays, prescriptions, and medical care.
  • Pay for rehabilitation aids.
  • Replace lost wages from time off of work.

Sometimes employers include critical insurance coverage for their employees. This is a benefit that makes an employer more desirable than their competitors as it lightens an employee’s load if they experience a critical illness.

When applying for critical illness insurance applicants are required to be assessed by an underwriting process. This process will help to gauge risk factors such as current age, gender, medical history, family medical history, BMI, and level of alcohol and nicotine consumption. For this type of coverage family medical history, nicotine intake, and BMI are given more weight than in a life insurance application.

These risk factors will help to determine the amount of coverage an applicant is eligible for, what their policy rates will be, and if any illness exclusions need to be added as an amendment to a standard policy.

Types of Premiums Available

Critical illness policies have many premium structures to best meet your budget.  These include 10 year term, 20 year term, term to age 65, term to age 75 and term to age 100.

Options Available

  1. Critical Illnesses covered. Some companies allow you to choose how many critical illnesses you wish to have covered.
  2. Return of Premium on Death. Critical Illness policies do not pay a benefit at death, but with this option your beneficiary will receive all the premiums paid into the critical illness policy.
  3. Return of Premium at Policy Maturity. This is available on longer critical illness policies such as term to age 75.  If you have not had a claim by that age, this premium will give you 100% of your premiums paid over the years back.
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