What is Critical Illness Protection?
Critical Illness Insurance is a type of 'Health Insurance' that provides a lump-sum payment if you were to become seriously ill. It is also given the name "Living Benefits", because you don't have to die to receive the payout. It is considered to be a type of an Insurance to protect your lifestyle, and to help you recover from a serious illness.
Although the illnesses that are covered vary from company to company, you can be covered for most (or all) of the following:
- Alzheimer's disease
- Aortic surgery
- Benign brain tumour
- Blindness
- Cancer
- Coma
- Coronary artery bypass surgery
- Deafness
- Heart attack
- Heart valve replacement
- Kidney failure
- Loss of limbs
- Loss of speech
- Major organ transplant
- Major organ failure on waiting list
- Motor neuron disease
- Multiple sclerosis
- Occupational HIV infection
- Paralysis
- Parkinson's disease
- Severe burns
- Stroke
Do You Need It?
Of course, no one plans to get sick, however, if something were to happen to your health unexpectedly, you want to make sure that your financially prepared to take care of the situation at hand.
While healthy lifestyle choices can be your best defence against some health risks, a critical illness such as cancer, stroke or heart disease can strike anyone at any time. Consider the following:
- One in three Canadians will develop a life-threatening cancer(1).
- One in two heart attack victims are under 65 years old(2).
- Each year, 50,000 Canadians suffer a stroke. Of all stroke victims, 75% will be left with a disability(2).
There are many statistics around about different type of illnesses and the chances of getting them, but the bottom line is that you are far more likely to get a critical illness before age 65, then you are to die. Also, due to medical advances, people are living longer and longer, and are more likely to survive a critical illness then ever before.
To determine if Critical Illness protection is needed, and how much is need, you can do some basic calculations. Basically, what you should do is to determine what your financial hardships would be if you were to become seriously ill. Many things need to be taken into consideration, such as:
- income replacement
- hiring a home-care nurse
- hiring a nanny
- business needs
- debt payments
- medical treatments
- travel
etc...
There are many websites that can help you determine the approximate amount of coverage required, but here's one that I found helpful, from Canada life:
Types of coverage
Most insurance companies will be able to offer Critical Illness insurance, either as a stand-alone policy, or as a rider (addition) to a regular Life Insurance Policy. Many group insurance policies from work will offer some sort of combo of life/disability/critical illness protection, but in order for you to know what is being offered, please carefully read your group plan package.
Although different companies will offer different products, generally the types of coverage offered would be a 10-year term, 20-year term, to age 65, to age 75, and in some cases to age 100 protection. Often, the 10 year and 20 year term policies are renewable (but be aware, the premium rates upon renewal will usually skyrocket!)
Making a Claim
Making a claim is not as difficult as some might think. What you need is a licensed medical physician (in Canada), who specializes in your illness, to diagnose you with that condition or an illness covered in your policy.
Once approved, the insurance company will pay out a lump-sum payment, usually 30 days after the claim has been put through. The great thing about having a lump-sum payment, is that there is no restriction on how the funds can be used. You can go on a vacation, go to another country for an operation, buy a car, etc...
Also note, once the policy has paid out, the policy is now considered to be ceased, and is no longer active. A bonus is that, even if you recover from the illness, you keep all the funds provided to you.
What if there is no claim made?
In some cases, someone will go their entire life (or most of it) without getting any critical illness (and therefore not making any claim). Depending on the insurance company, some will provide you with a 'premium rebate' addition to your policy, which means that if the policy expires, and you have not made a claim, you receive all your premiums paid into the policy back in full. Also, if a person were to die without making a claim, the premiums can also be returned back to the beneficiary designated on the policy. This is one thing that insurance companies use to to peak the interest of clients.
Critical Illness protection can be offered by any Life Insurance Agent/Representative or can be offered by most Life Insurance Companies directly. As mentioned before, it can be an addition to a regular Life Insurance policy, and if combined, will often be cheaper then getting a standalone policy.
If you are not sure whether this is something that would be beneficial to you, please consult your financial advisor before making any decisions. I hope you've learned something from this post, and if you would like to get more information on this type of protection and the choices available, please do not hesitate to contact me.
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ReplyDeleteI'm glad you got some value out of the posts. It is always great when I can provide people with information that they can make use of in their lives!
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