CI - WHO NEEDS IT?

CRITICAL ILLNESS INSURANCE

WHO NEEDS CRITICAL ILLNESS INSURANCE?

HOW MUCH CRITICAL ILLNESS INSURANCE SHOULD I BUY?

Who needs Critical Illness Insurance?

Anyone who:

• has debts or bills
• has a “significant other”
• has children
• is alone
• would be negatively impacted by a significant illness

I could also answer by simply saying “Anyone”. If something were to happen to you, would you like someone to be there for you? Would you need to hire someone to help run your business? Pay an existing employee an additional amount? If something happened to your “significant other” or to one of your children, would you want to be there for them? Would it help if six months to a year of your mortgage, your rent, your credit cards or other bills were paid?

How much Critical Illness Insurance should I buy?

Buy as much as you can reasonably afford. Do NOT feel that you need to buy a huge amount. Certainly it is very unlikely that you would need as much Critical Illness Insurance as you would Life Insurance. Would $50,000 help? How about $25,000? Would you refuse $10,000?

“I have Disability Insurance. Why do I need Critical Illness Insurance?”

First of all, DI allows us to pay our usual expenses. It does not cover the additional expenses often created by a Critical Illness. For example, if you have cancer, you may need chemotherapy. After a session of chemo, you will not be driving home. Either your wife will have to take time off work or you will need to take a taxi. If you have a heart attack, you may not be disabled long enough to satisfy the waiting period on your disability policy. Alternatively, you may decide to “slow down” and reduce your hours. Disability Insurance will probably pay you, depending on the type of plan that you have, if your doctor tells you that you MUST reduce your hours, but not if you simply decide to change your lifestyle. If your condition requires home or vehicle modification, do you have the available funds? If your physician suggests experimental medication (or medication not covered by your Provincial Drug Plan or your private insurer), will you have the funds to pay for what may be a VERY LARGE bill?

“Why are you suggesting that I purchase Critical Illness Insurance for my spouse or for my children?”

If something happens to your spouse or to your children, you will want to be there for them. If you have to take time off work, you almost certainly will. This may cause significant financial issues, which can at least be reduced if you purchase Critical Illness Insurance. No one likes to think of a spouse or a child becoming ill but it can happen. (I know, because it happened to my son). Insurance does not solve a problem, but it does allow you to do the best that you can, or to be there when you are needed

“I am financially well set with many millions in assets. Why would I need Critical Illness Insurance? I can well afford to pay any costs that I may incur.”

True; you can afford to pay these costs. You can easily write a check for $1 million if need be. But how can you best use your money? Should YOU write a check for $1 million, or are you better off paying a premium to the insurance company and let them write the check? For example, in the case of a male aged 45 who is a non-smoker, $1 million of Level Term to Age 75 Critical Illness Insurance would cost $12,500 in annual premiums. 

Back in 3 weeks to discuss the different types of policies available

Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance

Introduction

CRITICAL ILLNESS INSURANCE

I am going to open this discussion with two questions:

1. Do you know anyone who has survived a serious illness such as a heart attack, a stroke, or cancer?
2. Did that illness have an effect on their lives or on the lives of those close to them?

I wish I could pause now and let you consider those two questions. Since I cannot, I will return to December 3, 1967: the day the world’s first heart transplant took place. I was personally more impacted by the Salk/Sabin Polio vaccines as I am a polio survivor, but the world’s first heart transplant was far more of a world shaking event. A doctor had removed a heart from a recently deceased person and implanted it into the body of someone else – and saved that person’s life. I remember the newspapers running “line scores” showing how long the recipient survived. They got longer and longer until they became almost meaningless. Medicine had performed a miracle and it was now almost part of our routine life. The only events in my lifetime that I can compare with that are the collapse of the Iron Curtain and the invention of the Internet.

I repeat: “Medicine had performed a miracle and it was now almost part of our routine life.” We now survive health issues that killed us not very long ago.

However, that survival comes with a price. It has a significant effect on our lives, our careers, our families, on those we love and on those who love us. It was one of the doctors who performed that first heart transplant, Dr. Marius Barnard, who saw these impacts and developed the concept of Critical Illness Insurance to help us deal with the impact of surviving one of those illnesses. We have always had Life Insurance, which deals with the impact of dying. But today medicine is allowing many of us to survive an illness.

This product has existed in Canada for almost two decades, but it has never really become as popular as it should be. Why is this? In my professional opinion, it is because the insurance industry did not do a good job of launching the product. There were at least four major mistakes made in the launch:

1. Far too much emphasis on statistics: “1 in 3 people are diagnosed with cancer.” We all know that a lot of people get cancer, but this sounds like a scare tactic. Further, and frankly, it is far too easy to react “Well I will be one of the two who is not diagnosed.”
2. Far too much emphasis on Term to Age 75 and Permanent products. People have budgets, which is why so much Term Life Insurance is sold. Because we know clients (particularly those in the “growth” stage of their lives and most in need of this protection) have many demands on their cash, we know that not everyone can afford permanent insurance. Based on the Insurance Journal, it took until August, 2009 for the industry to discover that clients have budgets.
3. Far too much emphasis on Return of Premium (ROP). If you need ROP to sell this product, then you do not truly understand the need for this product. ROP is for the wealthy and for corporate clients.
4. Finally, forget using CI to purchase care from the private system or outside of Canada! There are far more effective (and lower cost) ways of doing that. If you think $100,000 CI – and then think “provide for care” – your instant reaction will be “$100,000 will do almost nothing for me”. Buy the care insurance independently. Because it pays bills and not a lump sum to you, it is MUCH cheaper! Virtually no one needs large amounts of CI. If you survived a heart attack, $25,000 or $50,000 or $100,000 would allow you to significantly reduce your bills, and your stress, and allow you to concentrate on recovery.

There will be a new post to this blog every three weeks. I will, of course, respond to questions and comments almost immediately.

Some of the topics I will be dealing with include:

• Types of products available
• Conditions covered
• Return of Premium on Death
• Return of Premium on Expiry/Surrender
• Why smokers pay so much
• Underwriting of CI
• Corporate CI
• Child CI

Click these for more information on the respective topics :
Long Term Care Insurance
Disability Insurance
Critical Illness Insurance
Life Insurance
Mortgage Insurance