Is Critical Illness Insurance Is it Right for You?
Critical illness insurance pays a tax-free lump sum on diagnosis of any one of a list of serious illnesses such as heart attack, stroke or cancer. Policies cover anywhere from three medical conditions to as many as 24. Statistics show you are almost five times more likely to suffer from a critical illness than you are to die before you reach the age of 65.
As of the end of 2014, approximately 1.7 million Canadians were covered under critical illness policies on either an individual or group basis. Working with a critical illness broker can help you explore the options available in the marketplace to decide if this coverage is right for you.
Individual critical illness policies in Canada are typically offered in terms of 10 years, 20 years, to age 75 or to the age of 100. Similar to life insurance policies the shorter the term the more cost effective the premium. Some insurers also allow policies holders to lock in premiums to avoid future rate increases.
The most popular face amount for a critical illness insurance policy remains $100,000.
Many of the large insurance companies offer a simplified and comprehensive version of coverage. The simplified policies cover 3 to 4 illnesses, while the comprehensive policies offer coverage for upto 24 life illnesses and offer additional added benefits such as access to Best Doctors, a privately owned, global benefits provider that serves more than 40 million members worldwide. It should be noted that statistics show that 91% of critical illness claims are for 3 major illnesses, heart attack, stroke or cancer.
Return of premium is an often advertised and frequently discussed option, which allows a policy owner to request return of all premiums (known as ROP) paid after a specific amount of time (provided no claim has been made), typically 15 to 20 years, or at age 65 or age 75. The idea is certainly appealing that one could have coverage for an extended period of time, knowing if one remains healthy and no claim is made they will receive 100% return of premium.
Other features, known as riders to a critical illness policy include disability waiver of premium rider, which eliminates premium payments if one were to become disabled; a second event rider which provides additional coverage (often limited) in the case of a 2nd critical illness; and a loss of independent existence rider.
However, as with life insurance and disability insurance policies, not all critical illness insurance policies are made equal. A provider such as Manulife Insurance for example offers a LivingCare which provides a monthly care benefit if you become functionally dependent at no additional cost. An insurer such as Ivari (owned 100% through a subsidiary of the Canada Pension Plan) offers competitive critical illness rates, however does not provide stand alone critical illness solutions (only as a rider to a life insurance policy). Desjardins Insurance offers an unique shared ownership critical illness policy where a company’s key employees receive coverage and potential for future return of premium with no tax implications. At the same time, a carrier like Empire Life which once offered comprehensive critical illness plans, has made a corporate decision to no longer offer critical illness insurance.
It is best to contact a critical illness broker to learn your about your options and design a plan that best suits your needs.
For all financial planning and insurance related matters, contact Protect Your Wealth today to learn more! We proudly service clients in Ancaster, Burlington, Dundas, Hamilton, Oakville, Waterdown and the surrounding areas.