Peter Boys, Boys Financial Services

Critical Illness – A Greater Risk than Dying?

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A healthy 35 year-old male has a significantly greater risk of suffering a disability or critical illness prior to age 65 than he will of dying. Continual medical advances are extending our life expectancy, while at the same time increasing the likelihood that we will survive major illnesses such as cancer, stroke and heart attacks. It’s also why Canadians need to consider critical illness (CI) insurance as part of their risk management strategy.

Unfortunately, many people see CI insurance as too complicated, too expensive, and something they don’t need, as serious illness is something that “happens to someone else”. Deep down we know this is dangerous thinking, as few of us can afford a lengthy period of sickness or disability, especially when carrying a large debt load.

CI insurance came about from a South African heart surgeon, who found that many of his patients were surviving heart attacks, but their finances often didn’t. It was his drive to create an insurance product that would provide cash to cover the costs associated with the illness, and for time taken off work while recovering.

When CI insurance came to Canada in the late 1980s, most policies covered three illnesses: cancer, heart attack and stroke. Although these basic policies are still available, most now cover up to 30 different conditions. But the three illnesses initially covered by early policies still represent 85% of claims.

Typically, when a policyholder is diagnosed with an illness covered by the policy, and survives 30 days following the diagnosis, they receive a tax-free lump-sum benefit, to spend how they choose. Coverage generally range from $25,000 to $2.5 million.

There are many unknown costs related to a serious illness, such as having a loved one take time off work to care for them, drive them to major centers for treatment, special equipment or home renovations. CI coverage alleviates financial pressures, so patients can focus on what they should be doing, which is recovering.

Depending on needs and budget, there are many different ways to structure CI coverage, from basic term to permanent products, with options of return of premium on death or early surrender.

The need for CI, life and disability coverage is usually the greatest when debts are at their highest. CI insurance is appropriate for any healthy person under age 65, but it’s most popular among families with young children, who want to be financially prepared for an unexpected illness. Premiums are generally lower for young, healthy individuals.

One option that includes CI insurance is a new hybrid product that combines it with life and disability coverage in one package. This is unique in that it provides a pool of insurance that, depending on need, has the flexibility to pay a monthly disability benefit, a lump sum on diagnosis of a covered illness, or a death benefit, all tax-free. Any disability or CI payouts reduce the pool available on death. This is a popular option for young couples, farmers, business owners, oilfield contractors, etc. as it covers three risks in one product at a discounted price.

Talk to a licensed insurance advisor to find out what product fits your individual financial needs, situation and budget. Even $25,000 of tax-free cash would go a long way to replace lost income while recovering!

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