Critical illness insurance is a lump-sum, tax free benefit that is paid out after you have been diagnosed with a critical illness such as cancer, heart attack and stroke.
It is not disability insurance for a few reasons:
- The payment of the benefit does not depend on if you are able to work or not.
- Where disability insurance would pay out if you were injured (for example you break your arm and can’t work for a period of time), critical illness insurance would only be paid out for if you are diagnosed with one of 25 illnesses. The only injuries it pays out for are those that are extreme such as severe burns, loss of independent existence, loss of limbs, loss of speech, blindness or becoming paralyzed.
- It’s not a monthly benefit and doesn’t depend on your income, it is only paid out as a lump-sum. Disability insurance is paid as a monthly benefit as a percentage of your income and is dependent on how much income you earn at the time of disability. You are not able to earn a higher amount on disability then you were when you were working.
- It could be taxed, if the company you work for is paying for the premiums.
But why do I need critical illness insurance if I have disability insurance?
Well I actually recommend that my clients have both. If you were a car, the disability insurance would be the brakes, and the critical illness insurance would be your air bags. It’s that extra security that could help to save your life. For example, my husband has cancer and he is currently on disability insurance, which covers 55% of his income. Living on 55% of your income is not an easy thing to do. Critical illness insurance would help to bridge that gap in income, help cover the extra costs we have related to him having prescriptions etc, and also the cost of alternative treatments which are not covered by our health care system.
It is not always easy to qualify for critical illness insurance, so it is always best to get this type of insurance when you are young and healthy. As soon as you have a symptom, you are no longer insurable. There is also a 90 day waiting period for cancer claims, so you would not be able to make a claim on any symptoms you may have during those first 90 days of the policy being in effect.
If you want to get an idea of how critical illness insurance is something everyone needs, just go on to GoFundMe. On this site you will see millions of people with illnesses, trying to raise money to get treatment or to just take care of their family while they are going through this illness.
If you don’t like insurance and think it could be a waste of money, you can even set it up so that you get back all of your premiums paid in 15 or 20 years, or at age 65. That way it can act as a health savings plan for yourself. If you get sick you get the $100,000 critical illness benefit. if you don’t get sick, you get back the $40,000 in premiums you have paid, which can be used towards retirement. It’s a win-win.
I like to set up critical illness insurance for children, as they are easy to insure, it is affordable, and if they were diagnosed with a critical illness during childhood, it would substantially help a family get through this traumatic event. If they don’t get a critical illness in the first 20 years of their lives, the parents can take back every premium paid, so it functions as a savings plan as well. For example, if you set the plan up on a 1 year old girl, the premium for $50,000 of coverage would be $44.69 per month and it payable for 20 years. After 20 years you stop paying, but she continues having the $50,000 of coverage. In 20 years you would have paid $10,725.60. You can take back all the premiums you paid and collapse the policy, or you can do a policy loan to access the cash if you wanted to keep the coverage in force.
Here is a list of what illnesses are covered by most critical illness insurance plans:
_ Aortic Surgery
– Aplastic Anemia
– Bacterial Meningitis
– Benign Brain Tumour
– Cancer (Life-Threatening)
– Coronary Artery Bypass Surgery
– Dementia, including Alzheimer’s Disease
– Heart Attack
– Heart Valve Replacement or Repair
– Kidney Failure
– Loss of Independent Existence
– Loss of Limbs
– Loss of Speech
– Major Organ Failure on Waiting List
– Major Organ Transplant
– Motor Neuron Disease
– Multiple Sclerosis
– Occupational HIV Infection
– Parkinson’s Disease and Specified
Atypical Parkinsonian Disorders
– Severe Burns
– StrokeCancer (Life-Threatening)
– Coronary Artery Bypass
– Heart Attack
5 additional juvenile illnesses
(covered up to age 25):
– Cerebral Palsy
– Congenital Heart Disease
– Cystic Fibrosis
– Muscular Dystrophy
– Type 1 Diabetes Mellitus
Everyone needs critical illness insurance. Calculate your need by clicking here.
If you want more information on this please or want to set up a plan for you or your family, please contact us.