Having a critical illness or condition can be a stressful event in any person’s life and can be combined with a devastating financial impact on the individual. Critical illness insurance is a policy that can provide you with a lump sum payment if you suffer from a covered critical illness and the conditions of the policy contract have been met. You are able to use this lump sum cash for whatever means you deem necessary such as helping cover an existing mortgage or paying for private medical care. This allows for the insured to focus majority of his/her energy in recovering from the illness while resting assured that financial responsibilities are taken care of.
Critical illness insurance does not however cover pre-existing medical conditions.
Critical illnesses and/or conditions can happen to anyone at any age. Below are some statistics on the frequency of critical illnesses:
- It is estimated there are over 70,000 heart attacks in Canada each year.
- There are between 40,000 and 50,000 strokes in Canada each year.
- An estimated 3,075 Canadians will be diagnosed with cancer every week.
What types of illnesses are covered by critical illness insurance?
Each contract and insurer set out different illnesses that are covered through their insurance policy. Typically, all policies cover 4 illnesses; cancer, heart attack, stroke and coronary heart bypass surgery. Other policies can be extended to cover up to 27 critical illnesses or conditions.
They can include:
- Multiple Sclerosis
- Major Organ Transplant
- Aorta Graft Surgery
- Benign Brain Tumor
- Heart Valve Surgery
- Pre-Senile Dementia (Alzheimer’s)
- HIV Assault with Needle
- Loss of Independent Existence
- Loss of Speech
- Severe Burns
- Parkinson’s Disease
- Balloon Angioplasty
- Blindness in both eyes
- Coronary Artery Disease
- HIV through Blood Transfusion
- HIV Medical Profession
- Loss of hearing
- Loss of Limb
- Motor Neuron Disease
- and possibly more
Do I need critical illness insurance?
In determining your need for critical illness insurance, you should consider benefits that may already be available to you through other insurance policies, such as life insurance and group health insurance. Some companies provide additional coverage to group members and their dependents for disabilities, critical illnesses and accidental death and/or dismemberment. However, group plans are generalized and therefore might not meet individual needs. You should first consider what is currently covered in your insurance policies and what additional coverage you need to be fully protected.
As with other insurance policies, consideration of financial needs must be taken into account. If you have a mortgage, you have a spouse and dependents or any other financial obligations; you should consider critical illness coverage. In the unforeseen event that you develop a critical illness condition or disease, you want to rest assured that your family and you are protected. The loss of income from one spouse or the loss of a sole income flow can create a financial disaster for you and your loved ones. Public and private health insurance plans generally do not cover day-to-day living expenses.
How much does it cost?
Premium costs for critical illness insurance are dependent on many factors such as the insured’s age, pre-existing medical conditions and the amount of coverage including the number of illnesses covered by the policy. Each insurance company will also have their own rates for the various policy contracts. Typically, it is beneficial for the insured to purchase their critical illness insurance as young as possible. Generally, the younger the insured is, the healthier he/she is and therefore these premium costs will be lower and apply throughout the policy term. Consideration should be given to your current income, financial obligations and dependents as well as your health care needs when choosing which plan you require.
My claim was approved. When do I receive payment?
Each insurer has different requirements before the benefit will be paid out to the insured. Typically, policies mandate a 30 day waiting period after the claim is approved for the individual to receive their payment. However, some policies can have a shortened period of 14 days or no waiting period at all. This waiting period was designed to guarantee that the insured has suffered from one of the covered illnesses for a specific period of time without recovery or death. After said time, the lump sum payment will be given to the insured to use how he/she pleases. Once your claim is paid, your critical illness insurance policy ceases.
What if I never make a claim?
Some contracts provide an option which in the event that the insured dies within the specific waiting period or he/she dies from a reason not covered by the policy, the premiums paid will be given back to the beneficiary named in the contract policy. Again, specific to each policy, some plans will return a portion of the premiums or all of the premium payments back to the insured at the policy’s maturity so long as no claim has been made.
What if I make a full recovery?
So long as you have exceeding the waiting period specified in your policy without recovery or death, then you are entitled to collect the whole benefit amount even if you make a full recovery later.
Is long-term care insurance the same as critical illness insurance?
No. Long term care insurance covers an individual for future personal care needed to assist with daily activities that are unrelated to a specific medical condition when he/she is unable to complete these tasks on their own. This can include home health care (where a nurse comes to the house to assist in administering medicine or providing other daily activities) or help with costs related to nursing care facilities and retirement homes.
Long term care insurance is based upon either cognitive or physical inability to perform or impairments while critical illness is based on specific medical diseases or illnesses as outlined in the policy. Further, money received from critical illness insurance can be used as the insured wants while money received from long term care insurance must be used towards certain avenues. Long-term care policies generally reimburse the expenses incurred for various types of care covered in the policy or they pay a benefit amount on a daily or monthly basis. Critical illness insurance provides a lump sum payment that can be used however the insured sees fit.
Is disability insurance the same as critical illness insurance?
No. Disability insurance provides monthly payments to the insured in the event of a disabling feature which prevents the person from performing his/her normal workplace activities. Essentially, it is applicable to a person with a disability that cannot work or perform daily duties. Disability insurance is meant to act as an income replacement as a result. Typically, the benefit is limited to a percentage of one’s regular and therefore will not exceed the income level of the individual.
Critical illness insurance does not require the insured to provide an income statement, unlike disability insurance, which appeals to those who do not have fulltime employment, are self-employed or stay at home. Distinctively, critical illness is not based on the individual’s inability to perform work.