 |
|||||||
 |
 |
 |
 |
 |
 |
 |
 |
Critical Illness Insurance
Critical illness insurance has business applications as well, say, for key person planning. A business owner would be just as short-handed if their key person has to leave on account of illness as on account of death. A business owner would have as much trouble with a large bank loan if he had a critical illness as his heirs would have if he died. A partner would have as much trouble coming up with the money to buy out his associate who has a critical illness as he would if he was disabled. So all three issues need to be dealt with in business applications: death, disability, and being diagnosed with a critical illness.
Most policies provide a number of riders which should be considered. Perhaps the most important is the return of premium rider. This allows the premiums paid into the plan to be refunded to you, or to your named beneficiary, if you die without making a claim or, in some cases, on surrender of the policy. This ensures value for your investment in that, either you get paid the claim or you get your money back.
Other riders allow you to include all your children, to purchase more insurance without having to prove you are healthy. Some provide automatic inflationary increases to the amount of insurance.
Mostly these policies are there to fill in the blanks left between life insurance, disability insurance, and accident insurance. As folks get older, the costs go up, of course, and the availability goes down on account of declining health. So it makes sense to buy at least a convertible term policy while you are young and healthy.
We recommend all our clients look closely and we invite your call for a quote and a discussion.
© Provided as a service to the clients and associates of
STEPHEN B H SMITH, CEB, CFP, PRP
YORKMINSTER INSURANCE BROKERS LIMITED
105 Dorset Street West,
Port Hope, Ontario, L1A 1G4
Tel: 905-885-4977 Tollfree: 1-800-668-1751
Fax: 905-885-2556 Mobile: 905-373-5670
sbhs@yorkminster.ca| www.yorkminster.ca
Relatively new to Canada, this is an insurance policy which pays its benefit as a lump sum, tax-free, when you are diagnosed with an illness listed in the policy. Of the twenty or so companies presently providing this type of insurance in Canada, there is a reasonably wide variation of covered illnesses. And the definitions of various illnesses vary from one company to another. So you do need to look closely at what you are purchasing.
What It Is Not. Critical illness insurance is not a substitute for disability insurance, for life insurance, or for accident insurance. Nor the other way around. You could have a critical illness for months, even years, and not be disabled by it. Life insurance pays the benefit when you die but critical illness insurance pays it to you while you are still alive. If you like, there is an equivalency aspect of critical illness insurance to accidental dismemberment insurance in that there is a benefit paid while you are alive by both plans, one for illness and the other for accidental loss of, say, your sight or hearing. You still need disability insurance since you could be disabled. You still need life insurance and probably you still need accident insurance.
Critical illness insurance started out in South Africa following the introduction of heart transplant surgery. Doctors there realized that, while they could save their patients’ lives and restore them to health, they could not save their patients’ finances. The patients could recover from the illness but their jobs, or their businesses, were gone. It got modified over time to cover other illnesses and the purpose got modified to cover costs related to modifying homes and vehicles to accommodate special needs, such as ramps, stair lifts, and elevating devices. Or to find a faster and more effective way to cure the illness somewhere outside Canada. Or to take a trip, long-deferred, but now more poignant with the client’s own mortality in closer focus.
In assessing one policy versus another, the list of covered illnesses is important, although most claims relate to heart attack, stroke, and cancer. However, more subtle, is the definition of the particular illnesses including exclusions and waiting times.
Some critical illness policies provide a mechanism, such as Best Doctors, whereby the claimant can have access to an international team of doctors and other professionals who are recognized as the world’s best in the particular field of the patient’s illness. This might be for a second opinion or for a more favourable course of treatment of the illness. In this case, the policy benefit would be the funding mechanism to pay for the second opinion and/or the superior or head-of-the-line treatment. It’s an important feature.
Critical illness policy benefit amounts can range from as low as a few thousand dollars to $1,000,000 or more. They are structured much like life insurance policies in the sense that you can buy it as ten year renewable and convertible term, term to age 75, term to age 100, etc. Convertible term means you can convert a limited term plan, such as ten year term, to a permanent plan such as term to 100, up to some point in the future but, meanwhile, you pay the lower term insurance premium. However the longer you defer the conversion, the higher will be the cost of the converted plan on account of your then attained age.
You can buy the coverage as a stand-alone policy or as a rider to a life insurance policy, or include it in a universal life policy. For a flat premium amount you can provide coverage for all the children in your family, even those not yet born. In most cases the child’s coverage can be continued through their adult life. Critical illness coverage is often available as a group benefit as well but the quality of group coverage usually is more restricted than that of individual policies. A number of credit card companies and professional associations are offering in on a voluntary group basis as well but, again, the quality of the coverage can be compromised versus that offered in a stand-alone policy (although the premium could be less).