Critical Illness Insurance

While nobody wants to think about getting a heart attack, stroke or getting diagnosed with cancer, it is important to be prepared. As medical science gets better and better, survival rates for previously fatal conditions have improved. However, the costs associated with advanced medical treatment have also gone up and can have a significant impact on yourself and your family. People concerned about this should consider Critical Illness Insurance as an additional layer of protection against the costs associated with serious illnesses.

What is Critical Illness Insurance?

Not all policies are created equal. Due to competitive pressures, policy terms may vary slightly between different insurance companies but the main benefit of having Critical Illness Insurance is that it provides a lump-sum cash payment that you can use to pay for treatment or maintain financial stability if you are diagnosed with a critical illness. For minor illnesses, many insurers will offer a partial payout. Unlike health insurance benefits, you get to choose what you want to do with the money.

A lot of insurers also offer fringe benefits to help in the recovery process including referrals to specialists and other medical professionals to aid in recovery or to confirm a diagnosis.
Another important point to note about Critical Illness Insurance policies is that there is the option to purchase a ‘return of premium rider’ which will return all of the premiums you paid if you survive the policy term without making a claim.

Many policies also have an option where they would return premiums paid if you pass away during the policy term without claiming the insurance. In this way, it acts as a pseudo life insurance policy to be left to your dependents.

Do I need Critical Illness Insurance?

Critical Illness Insurance provides an additional layer of protection that can be used in conjunction with other insurance policies or emergency savings you might have. The lump sum payment can be used to alleviate financial or household concerns during treatment, replace lost income or access medical treatments not covered by your other health insurance plan(s). If these benefits appeal to you, you should consider purchasing Critical Illness Insurance.

Other good candidates for Critical Illness Insurance are people without any health insurance, such as business owners or people who are self-employed. A Critical Illness Insurance policy can act as a safety net for people who do not have access to other health or disability insurance policies.

There is also another less talked about benefit that’s worth considering: protection against loss of future insurability. For example, if you survived a heart attack in the past and want to purchase travel insurance, your medical history will make it very expensive. However, if you had some of the lump-sum benefit left over, you can use that to pay for expensive travel insurance premiums or self-insure if you are denied insurance altogether.

How much insurance should I buy?

This decision largely depends on what other types of protection or savings you have in place. If you’re a business owner who’s mostly hands off or if you run a family business where other members can assist, you might not need as much insurance because you would not need to replace your income.

However most advisors will recommend purchasing insurance equal to 6 to 18 months of net income to pay for treatment and give you enough time off work to recover.

When should I buy Critical Illness Insurance?

You should consider this type of insurance if you have no other insurance protection or when you start living independently and have some major expenses such as rent or a mortgage.

If you’ve made the decision that purchasing Critical Illness Insurance is the right move for you financially, we do recommend purchasing while you’re still young to lock in a lower premium for as long as you can. As with most things in the personal or health insurance arena, the younger you purchase, the cheaper it will be.

If you’re still confused or would like to learn more about which option is right for your specific situation, contact us here.