Written by Dave Stewart
In an unpredictable world with health uncertainties abound, safeguarding one’s financial well-being in the face of an unforeseen critical illness is paramount. Critical illness Insurance stands as a vital shield, offering a unique form of protection against the financial aftermath of severe health conditions.
Unlike traditional health insurance, which often covers medical expenses, critical illness insurance provides a lump-sum payout upon the diagnosis of a covered condition. This influx of funds is designed to empower individuals during their time of need, offering flexibility to address medical costs, pay bills, clear debts, and maintain a semblance of normalcy during life-altering health challenges.
For example, if a person becomes diagnosed with a critical illness, can the family afford to have the other spouse then take an unpaid leave from work to be with them during this time of need? In this situation the cash payout from a Critical Illness policy can be used as lost income so the bills can all be paid when neither spouse is working. This infusion of money into the household helps the family concentrate on the most important priority, which is getting healthy.
The financial burdens are eased by having a critical illness insurance policy.
What is Critical Illness Insurance?
Critical illness insurance is a type of insurance coverage that provides a one-time lump-sum payment if the policyholder is diagnosed with a specified critical illness or medical condition. As the policyholder is living when the lump sum is paid out, the money goes directly to the policyholder, and they can do whatever they want with the money.
Power of Preparedness
One of the key benefits of critical illness insurance lies in its proactive nature. By investing in this type of coverage, individuals take a proactive step towards securing their financial future. In the event of a critical illness diagnosis, the financial support provided by the insurance can make a significant difference in the ability to focus on recovery without the added stress of financial strain.
What Critical Illnesses are Covered?
This may vary slightly from insurance company to insurance company, but the main 25 critical illnesses covered on most insurance policies are:
- Acquired Brain Injury
- Bacterial Meningitis
- Deafness
- Loss of speech
- Occupational HIV Infection
- Alzheimer’s Disease
- Blindness
- Heart Attack
- Major Organ Transplant
- Paralysis
- Aortic surgery
- Cancer
- Heart Valve Replacement
- Major Organ Failure on Waiting List
- Parkinson’s Disease
- Aplastic Anemia Coma
- Kidney Failure
- Motor Neuron Disease
- Severe burns
- Benign Brain Tumor
- Coronary Artery Bypass
- Loss of Limbs
- Multiple Sclerosis
- Stroke
What are the Chances?
Many people purchase personal life insurance and have some sort of disability insurance policy offered through their employer or purchased personally. However, not many people have a critical illness policy, it is often the forgotten coverage. However, it has the highest probability of paying out.
Consider these facts about the 3 most common critical illnesses suffered:
- Women have a 44.3% chance of a cancer diagnosis; men have a 45.1 % chance of cancer in Canada (1)
- Someone in Canada has a stroke every 5 minutes (2)
- About 158,000 people are diagnosed with a heart attack each year in Canada (3)
- Survival rates for heart attack diagnosis are improving in Canada… since 2001 death rates from heart attacks have decreased by 21% (4)
- Survival rates for the seven most kinds of cancer are improving due to increased screening (5)
So, what these stats tell us is that there is still a significant chance of being diagnosed with a critical illness in your lifetime, but your chances of surviving are increasing. This makes a lot of sense as people are much more aware of certain hereditary diseases like breast cancer and getting screened more frequently. However, this doesn’t decrease the probability of being diagnosed.
Money Back Insurance- Is this a Real Thing?
When it comes to Critical Illness, it actually is. Critical Illness can have two unique “riders” that can he added onto the policy that will guarantee some sort of compensation is paid out to the insured in the future. These two riders are called: Return of Premium upon Death & Return of Premium upon Cancellation.
- Return of Premium Upon Death. With this rider, for a small additional premium per month (usually 3-4% of the base premium)- if the insured passes away from any cause of death while the policy is in force then all monthly premiums paid up to that point are returned to the policy owner (would be paid to their beneficiary)
- Return of Premium Upon Cancellation/Expiry. With this rider, for an additional premium per month (usually 30%-40% of the base premium)- if the insured ever cancels the policy after a certain length of time (usually a minimum of 15 years or age 65) then all monthly premiums paid up to that point are returned to the policy owner
So, if both riders are purchased on a Critical Illness policy, then 1 of 3 things will happen with each outcome paying some sort of compensation to the insured or their family.
- The insured suffers a covered Critical Illness and the amount of coverage they purchased is paid out to them while alive and to help them fight this illness.
- The insured doesn’t suffer a Critical Illness but pass away from any cause of death, all the total monthly premiums they have paid up to that point are paid to their family or beneficiary.
- The insured doesn’t suffer a Critical Illness, doesn’t pass away, and after 15 years deems the policy no longer necessary. At this point they can cancel the policy and all the total monthly premiums they have paid up to that point are returned to the insured.
Quote Example
35 year old non-smoking woman with a $100,000 Critical Illness benefit
- Base Premium = $36.45/month
- Return of Premium Upon Death = $1.08/month
- Return of Premium Upon Cancellation at age 65 = $21.42/month
- Total Premium= $58.95/month
Considering the 3 possible outcomes:
- At any point if the insured suffered a Critical Illness, $100,000 is paid out to them
- At any point they pass away- all premiums paid would be refunded
- At age 65 or anytime thereafter, the insured can cancel the policy and all premiums paid would be refunded
Conclusion
As we navigate the uncertainties of life, it’s essential to arm ourselves with tools that provide resilience and support in times of crisis. Critical illness insurance emerges as a beacon of hope, offering a financial safety net when we need it most. By understanding its significance and incorporating it into our financial planning, we empower ourselves to face life’s challenges with greater confidence and security.
Dave Stewart 1-800-667-1802 ext 240
[email protected]
Call Zehr Insurance brokers and see if we can help you with your insurance needs.
