WHAT IS IT?
Critical illness insurance was first developed by a medical doctor: Dr. Marius Barnard in 1983. Dr. Barnard observed the financial perils his critically ill patients encountered and understood the need for an insurance-based solution to protect against these circumstances.
Experiencing a critical illness demands a significant physical, emotional, and financial toll. Critical illness insurance is designed to protect against these damages by providing a tax-free payout after diagnoses of 1 of as many as 25 illnesses. This benefit can:
- replace lost income
- repay financial obligations
- assist in accessing expensive medical care
- fun in-home support
- or be used for any other purpose
Furthermore, many policies include a preventative incentive which allows the policy owner to access up to 15% of the policy’s face amount if they are diagnosed with a qualifying serious, but not critical, illness.
HOW DOES IT WORK?
Get a cheque.
First you need to determine how much Critical Illness is required. You can qualify for as little as $10,000 up to as much as $2,000,000. There will be a premium associated with the type of Critical Illness plan which you can pay monthly or annually. If you are diagnosed with one of the listed critical illnesses in your policy you will be give a lump sum cheque for the amount of your policy 31 days after your diagnosis for the majority of illness or 91 days after a cancer diagnosis.
Once you determine the amount of Critical Illness Insurance that is required for you own financial needs, there are several ways to structure the policy. This can depend on how much you can afford. Underwriting factors such as age, sex, smoker status, and family history will also be considered when you are applying for Critical Illness insurance.
A key step toward protecting against the repercussions of suffering a critical illness is determining what type of critical illness insurance best fits within your unique financial picture. Most critical illness products fall within one of the following two categories.
What types of Critical Illness policies are there?
Term Critical Illness Insurance
- With terms ranging from 10 to 25 years, term critical illness insurance is a great solution for those with a temporary need to protect against lost income or cover particular financial obligations. Term critical illness is markedly affordable and simple to issue.
- Term critical illness insurance guarantees rates for the duration of the term. At the end of the term, the policy owner can decide to either replace the policy with a fresh policy or they can allow the policy to execute its automatic renewal feature. If one remains in good health, they will often elect to replace the term policy with a new policy as the replacement will be much more affordable than the automatic renewal. This is due to the replacement policy factoring one’s current health into its pricing while the automatic renewal assumes a worse-case-scenario health situation and prices the renewal premium accordingly. If one happened to be in poor health as their renewal approached, they may decide to allow the automatic renewal to occur as they would not qualify for new coverage.
Permanent Critical Illness Insurance
- Permanent critical illness insurance offers all the same benefits of term insurance but on a permanent basis. This means no renewals. Once placed, the premium remains the same and coverage continues to either age 75 or for life.
How would you like to receive all of your money back after paying into a critical illness policy?
One notably attractive component of permanent critical illness insurance is the ability to add a return of premium rider. The return of premium rider allows for the owner to cancel the policy, usually after year 15, and receive every single dollar paid into the policy back in their pocket. This feature makes permanent critical illness insurance an incredibly attractive solution for a diverse range of portfolios.
Other Critical Illness policy riders
In addition to the return of premium rider available for permanent Critical Illness policies, the below riders are also able to be added to eligible policies:
Second event rider
This rider provides limited coverage for a specified second critical illness event without requiring the completion of a medical examination. The second event benefit maximum is often the lesser of 50% of the base policy face amount and $100,000.
Return of Premium at Death
This rider returns all premium paid into the policy to either the owner or the owner’s estate if the insured dies while the policy is in effect. This rider is triggered regardless of the cause of death.
Loss of Independent Existence Rider
Beyond the named ailments in your policy, including the loss of independent existence rider makes it such that a lump-sum benefit is delivered to you if you become unable to perform two or more activities of daily living.
Disability Waiver of Premium
If the insured becomes totally disabled for a period of 90 consecutive days, this rider waives all premiums for the policy for as long as the disability continues.
What type of policy is best for you?
Reviewing the following four questions with one of our expert brokers will help you determine the exact policy that’s best for you:
How long you need the policy in place for?
How much can you afford?
How is your current health?
What is your family history like?
If you have family history of critical illnesses then you are more likely to get one yourself.
Go to the CANADA LIFE KNOW YOUR RISK CALCULATOR: try this to determine your likelihood of developing a critical illness.
Applying for Critical Illness insurance
To secure the selected critical illness coverage, one must apply for the insurance. Paradigm Insurance in Winnipeg often utilizes non-face-to-face application methods to maximize efficiency. This means that an application can be completed and the policy can be issued solely through telephone and email communication. Alternatively, one can attend our Winnipeg office if he or she prefers to complete the application in person.
Paradigm Insurance Inc. works with a wide array of insurers to guarantee the delivery of the best product, at the most competitive price, in the most client-friendly manner. Currently, we can offer clients under the age of 50 under $200,000 of critical illness insurance without medical underwriting being required upfront. By use of artificial intelligence, most applications that fall within those parameters will be issued within days of completion.
Who benefits from it?
If the insured individual is diagnosed with a qualifying critical illness, a tax-free benefit is delivered to the policy owner; be it the insured individual or a corporation.
Benefits to Individuals
If the insured individual receives the benefit, they can use the funds however they see fit. They may use the funds to:
receive express private healthcare from a facility like the Mayo Clinic;
cover unavoidable expenses to unburden the family;
take a vacation to get away from the stress of it all.
There are no restrictions on how the funds can be used. Consequently, the potential benefits of maintaining critical illness coverage are unlimited. In short, a critical illness benefit allows the recipient to focus on what matters most to them when times are dire. The critical illness benefit liberates the recipient from financial distractions and, instead, allows them to focus on recovery.
Benefits to Corporations
Alternatively, if a corporation elects to purchase a critical illness policy, it may do so to protect itself from the loss of a key-employee or to abide by the terms of a buy-sell agreement. The loss of a key-employee may result in lost revenue as a consequence of decreased sales or performance and or this loss may result in unwanted costs associated with locating and training a replacement. By purchasing critical illness insurance, the corporation will receive a tax-free payment after the insured’s diagnosis and can use these funds as it sees fit. Furthermore, many corporate shareholder agreements require the shareholders to maintain insurance for the purpose of facilitating a smooth transition in the event of one shareholder either passing away or becoming unable to perform his or her duties. Critical illness insurance can fulfill this need by providing the remaining shareholders the funds necessary to buy the exiting shareholder’s shares at the necessary time.
Who can apply?
Anyone up to the age of 65 can apply for some form of critical illness insurance. The existence of particular pre-existing conditions may restrict, or make it difficult, for some individuals to obtain critical illness coverage. However, Paradigm Insurance Inc. works with a vast quantity of insurance providers which maximises the probability of discovering a suitable solution. Moreover, critical illness insurance policies can be part of a group plan where individuals are insured and the policy is owned by either the insured or the corporation.
What are the odds of being diagnosed with a critical illness?
The statistics regarding critical illnesses are stark.
25% of Canadians will develop some form of heart disease
50% of people will develop cancer
62,000 Canadians suffer a stroke every year.
As the field of medicine advances, survivability of these events improves.
60% of Canadians will be alive 5 years after their cancer diagnosis
85% of those who experience a heart attack survive
80% of stroke victims live.
The average age for a critical illness diagnosis is 49 and the average benefit paid is $56,000.
What illnesses are covered?
Most commonly, the purchaser of a critical illness policy can select one of two coverage options: 25 illnesses or 4 illnesses. The ’25 illnesses’ option provides the most comprehensive coverage available while the ‘4 illnesses’ option is a more affordable option which covers the 4 most common critical illnesses.
The 25 covered illnesses are often the following:
Aortic Surgery
Aplastic Anemia
Bacterial Meningitis
Benign Brain Tumour
Blindness
Cancer (Life-Threatening)
Coma
Coronary Artery Bypass Surgery
Deafness
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
Paralysis
Parkinson’s Disease and Specified
Atypical Parkinsonian Disorders
Severe Burns
Stroke
Additionally, if coverage is purchased for a juvenile, the following 5 illnesses are also covered until age 25:
If the ‘4 illnesses’ option is selected, the following
illnesses are covered:
Cerebral Palsy
Congenital Heart Disease
Cystic Fibrosis
Muscular Dystrophy
Type 1 Diabetes Mellitus
Cancer (Life-Threatening)
Coronary Artery Bypass Surgery
Heart Attack
Stroke
As with the ’25 illnesses’ option, if coverage is purchased for a juvenile, the same 5 additional illnesses are covered.
