Critical illness insurance
To avoid the financial worries that a serious illness can cause to loved ones and oneself, it is important to be prepared for any eventuality. Here is an article from the Protect Yourself site written by Frédéric Perron who will answer many of your questions.
According to the Canadian Cancer Society, 40% of women and 45% of men will develop cancer in their lifetime. About 60% of people will survive for at least five years.
These are the kinds of statistics that are used to sell you a critical illness insurance policy. Insurers also point out the consequences that this type of illness could have on your portfolio: “Make sure your finances can survive as well,” says National Bank Insurance brochures.
The principle of critical illness insurance is simple: if you have one of the diseases listed in the contractor have to undergo a covered surgery, you will be paid a lump sum, free of tax, to use as you please.
IS IT NECESSARY?
That’s THE big question about this product. With the public health insurance scheme, most of the care needed in case of illness is free. Many people also benefit from a group insurance plan that covers, among other things, drugs (also covered by the public plan) and disability (a percentage of your salary is replaced in case of illness or accident).
But even if you have these protections, a serious illness can lead to additional costs: drugs not covered, home care, purchase of adapted equipment, travel and housing to get treatment outside your city, and so on.
“On average, people who have cancer stop working for a year,” says Céline Geoffrey, Director of the Quebec Organization for People with Cancer. Often, the spouse also stops working. The gap between what you earn and what you spend can become phenomenal. It may seem trivial, but at the Hôtel-Dieu in Quebec, parking costs $ 16 a day. If you go there three times a week, it goes up fast! Also, it can be difficult to renew your mortgage when you are seriously ill. ”
In short, this type of insurance is not necessary, but it can be useful if you get sick. However, according to Denis Preston, financial planner and lecturer in insurance and risk management at HEC Montréal, some risks should be covered as a priority.
“We have to go back to the basic needs of consumers,” he says. Disability insurance must come before critical illness insurance. The first covers all illnesses and accidents, while the second only compensate you if you have certain diseases. ”
Mr. Preston believes that you also need to prioritize life insurance (especially if you have dependents), savings for retirement and home insurance.
WHO IS IT FOR?
According to a study conducted by reinsurer Munich Re in 2005, the average customer turns 38 when he signs up for a critical illness insurance policy in the USA. The average age at the time of the claim is 52 years for women and 53 for men.
Some policies specifically cover children (congenital diseases, cancer, etc.) or women (breast cancer, cervical cancer, etc.). “It’s a useful product for just about everyone, except perhaps the well-to-do, believes André Buteau, the financial planner, and life insurance company. Again, you have to be careful. If you have a net worth of $ 500,000 and that value is your home, it’s not easily accessible money. ”
According to Mr. Buteau, it is preferable to subscribe to this type of insurance before you turn 30: “That way, the person makes sure before health problems are professed in his parents, which can have an impact premium. “Note that the maximum age at the time of subscription is 50 to 70 years, depending on the insurers and the policies.
WHAT IS THE PROTECTION OFFERED?
Several companies sell two plans, for example, one that covers three, four or six diseases and the other, more expensive, which covers about twenty. The three diseases and surgeries most commonly covered are a heart attack, cancer-causing death, and stroke.
According to Munich Re, these three diseases account for 85% of claims. However, the definitions of illness vary from one insurer to another, which can make it difficult to compare policies. “Insurance companies have more information about diseases than consumers and brokers,” says Denis Preston. They write the definitions with lawyers and doctors. It’s almost impossible for consumers to understand the difference between the two definitions. ”
Aware of this problem, the leading insurers and reinsurer Munich Re made public last April standardized definitions, which insurers can use on a voluntary basis. “The reaction of the companies is very positive. Some of them have already adopted these definitions, “said Hélène Michaud, director of marketing at Munich Re, in May 2008.
HOW MUCH CAN I TOUCH?
In the event of illness, the amount of the benefit offered by insurers ranges from $ 10,000 to $ 2 million. The policy also often provides for the payment of 10% of the face amount – up to $ 10,000, $ 25,000 or $ 50,000 – if you have cancer that can be easily treated (for example, cancer prostate at an early stage) or if you have to undergo coronary angioplasty (surgery to unblock an artery of the heart).
The amount of insurance to take will vary depending on what you expect to pay in the event of illness. “If people can take a minimum of $ 25,000, it’s already that, believes Marco Vendramini, the financial planner. That’s enough to avoid having to dig into your RRSP. ”
HOW LONG DOES THE PROTECTION LAST?
There are several categories of policies that can be sold alone or as an endorsement to a life insurance policy. These are the two most common categories.
COVERAGE UP TO 65, 70, 75 OR 100 YEARS
If you have a covered illness before the age limit, you will receive a lump sum benefit. Premiums can be fixed guarantees (they remain the same for the entire duration of the contract), increasing guarantees (they increase periodically to pre-established amounts) or unsecured (they are periodically revised according to the claims of insureds who have a comparable profile to yours). Some rules allow you to stop paying premiums when you reach a certain age (for example, 65) or if you have been in the policy for some time (for example, 25).
TEMPORARY COVERAGE OF 10 OR 20 YEARS
Your premiums and coverage stay the same for the duration of the contract, which can usually be reviewed and renewed until age 75. A policy that covers you for a long time with guaranteed premiums usually costs more initially. The advantage: you stay insured for a long time at a predetermined price. Temporary insurance can still be useful to protect you while you are most at risk financially (dependents, mortgaged home, pension fund still insufficient, etc.), for example from 40 to 50 years or 35 at 55 years old.
WHAT ARE THE OPTIONAL GUARANTEES?
Insurers offer several endorsements. One of the options often offered is the refund of premiums after a certain time or when you reach a certain age. With this option, you can withdraw a percentage of premiums paid by terminating the policy. This option raises premiums substantially, by more than 50% in some cases.
According to André Buteau, it is often better to increase basic protection than to take the option of refundable premiums. Denis Preston also believes that you can do without this option: “If you take it and you have an illness before collecting your premiums, you will have paid more for the same benefit. And if you cancel your policy too early, you will lose that money. “Reimbursement of premiums at death, waiver of disability premiums, second-time coverage and child coverage are all covered. also, endorsements often offered.
HOW MUCH DOES IT COST?
According to Munich Re, the average annual premium for critical illness insurance is $ 1200. Several factors can affect the number of premiums, including desired coverage, age, gender, being a smoker or not, health status, and family history. For examples of monthly coverage and premiums, see the table below.
HOW TO SUBSCRIBE?
It can be done with a direct insurer or a life and health insurance broker. It is usually enough to answer a few questions about your state of health, lifestyle and family history. Medical examinations may also be required.
HOW TO RECEIVE A BENEFIT?
In general, you must survive for 30 days after a medical specialist has produced a written diagnosis confirming that you have a covered disease. Also, you must not have suffered irreversible arrest of all your brain functions. In general, if cancer occurs within 90 days of the policy coming into effect, you will not be covered and will not be covered for this illness until the end of the contract.
CAN I CANCEL MY POLICY?
Yes, most policies can be terminated without charge. On the other hand, if you have taken the premium refund option after 20 years, for example, you will not be able to get your money back if you cancel your policy after 15 years.