Critical Illness Insurance
More and more Canadians who understand the true financial costs of major disease are turning to Critical Illness Insurance to gain peace-of-mind and protect their savings. Critical Illness Insurance (CII) provides a tax-free lump sum payment to the beneficiary who has contracted or suffers from a major disease. This allows them to soldier on in the short-term and pursue treatment without the concern over immediate expenses.
Critical Illness insurance covers an individual against illnesses covered such as cancer, heart attack and stroke and is sold in various terms; 10 year, 20 year, to the age of 75 or 100. The individual must typically survive 30 days after the diagnosis to receive the lump-sum. Policies can cover as few as 3 medical conditions to as many as 24 along with a number of available riders. Typically, CII does not cover self-inflicted injury, attempted suicide, drug-use, war participation or operating a vehicle while intoxicated. Each carrier and policy needs to be reviewed closely to determine the coverage provided. Like qualifying illnesses, each policy and carrier has a different list of exclusions, and should be reviewed before agreeing to a policy.
The likelihood of contracting a covered illness is much greater than most people believe. According to the Canadian Cancer Society, one-third of Canadians will contract cancer. The Heart and Stroke Foundation states that 50% of heart attack victims are under the age of 65, and 75% of stroke sufferers will be left permanently disabled. Although, CII does not cover the disability, but rather the disease that caused it, the result is that employment possibilities and earning potential may be severely limited or eliminated.
Critical Illness Insurance is not a reimbursement of medical expenses, specifically. The beneficiary who is typically the insured-person decides how the money will be spent. The proceeds from CII can be used to modify homes and automobiles allowing recipients to maintain their independence. Everyday bills can be covered, as well as paying for cutting-edge medical treatment outside Canada to combat the disease. The funds can also be used to spend more time with family before health deteriorates further.
The recommended amount of coverage is approximately six months of salary plus an additional six months of expenses plus three months of a spouse's salary plus an estimation of what home modifications might be needed. An individual earning $100,000 per year with $8,000 of expenses per month whose spouse makes $120,000 per year should seek a minimum of $128,000 of CII coverage, for example. Depending on your age, the amount of coverage and the options selected, premiums can start at under $1,000 per year.
The Bottom Line
Like all insurance, Critical Illness Insurance should be a planned, reasoned purchase made well in advance of actually needing it. With so many options and details to consider, you may want to recruit the advice of your financial advisor or other insurance expert in order to ensure the proper fit for you and your needs.
Written by:
Haley Thomas, CIM
