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Critical Illness Insurance
Why Critical Illness Insurance?
Perhaps one of the least known types of insurance protection by the general public, critical illness insurance is known in the business as a living benefit. It is similar to disability insurance in that you must live in order to make a claim. Insurers provide a predetermined list of conditions that are covered under the plan, such as heart attack, cancer, stroke, coronary artery bypass surgery, coma and paralysis (just to name a few). If the insured is still living 30 days after being diagnosed with one of policy’s covered conditions, the insurer provides a lump sum, tax-free benefit to the insured.
The aim of this type of insurance protection is to provide the insured with access to adequate funds necessary to alleviate the financial stress associated with undergoing this type of severe or critical illness. Think money for short-term debt repayment, replacement of income, funds necessary to cover travel and medical expenses associated with the illness for both the insured and their family. It also provides financial resources to doctors abroad that would normally be inaccessible under provincial health insurance. Critical illness insurance is designed to help you to live, so that your life insurance policy will not pay out right away!
A case study:
Ethel’s Critical Illness Insurance
Remember Ethel from our last case study with respect to disability insurance? Well, she also claimed on a critical illness policy for the same diagnosis of cancer. After surviving the 30-day waiting period after her diagnosis, her advisor delivered the critical illness claim cheque. How is it possible that she was able to claim against her critical illness contract and her disability insurance contract for the same disease? The answer is simply that the policies have two different aims and they can pay simultaneously. Whereas a disability insurance policy can provide a replacement of income while an insured is disabled from carrying on their employment functions, a critical illness policy pays a lump sum benefit. Ethel wanted the peace of mind in knowing that if she was stricken with a critical illness, there would be enough money from her critical illness policy to retire her small mortgage and pay off her sundry debts (lines of credit and credit cards), while at the same time allowing for enough remaining funds to pay for travel and medical expenses. She also wanted to ensure that her after-tax income would be replaced as to not present herself a burden to Terry, her brother and business partner. Although she suffered from one of the most unfortunate events of her lifetime, the diagnosis of cancer, she was financially prepared to deal with this issue and that lifted a great burden. The critical illness benefit ensured that her husband and daughter were able to be by her side while she had to travel approximately four hours for her cancer treatments over the course of several months.
The statistics on this issue are very clear: Two out of five Canadians will suffer from cancer alone in their lifetime!* Unfortunately, many will not be as adequately prepared as Ethel. Don’t be a statistic — know your options by speaking with a Front Gate Financial Group advisor!
* Data taken from the iA Excellence Cancer Guard brochure.
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