Critical illness Insurance- Why do we need it?
I already have a million dollars of Life Insurance, do I still need Critical Illness insurance?”
Yes, you still need the Critical illness insurance because the life insurance you have will only pay your survivors if you die. Statistically, there are more chances that you will survive a major medical emergency than die from it, but will you survive financially?
Here are some key features and benefits of Critical Illness insurance.
1) Critical illness insurance pays to live.
Critical illness insurance pays if you suffer a condition and don’t die. Critical illness insurance complements life insurance, it does not replace it. Statistically speaking there is more than an 80% chance that you will survive your first heart attack and may continue to live for many years with proper medical care. According to this article on Harvard medical school’s website more than 90% of people survive a heart attack. Other major conditions also have very high survival rates but financial survival can be difficult for most people. If something were to happen to you, do have enough money in your savings to survive if you are not able to go back to work for a prolonged period of time?
2) It pays a lump sum benefit if you survive one of the 24+ covered conditions.
Critical illness coverage pays a lump sum benefit if you survive 30 days, for most conditions. This is a tax-free lump sum benefit paid by the insurance company once they get all the medical records from your doctor and hospital. All you have to do is to send in your claim forms duly completed after the required 30 day survival period for most conditions. Once the claim is approved and they send you a check for the insured amount, you can use the money as you wish.
3) You don’t have to be disabled to claim on Critical illness insurance.
If you feel that you are strong enough to go back to work as soon as possible, that is no problem and does not affect your claim for your insurance policy. You don’t have to be disabled to have your claim approved unlike disability insurance.
4) You have the option to get all your money back upon policy expiry if you don’t claim.
CI insurance can have an option that can be added to your policy that allows you to get all your money back if you don’t claim. That means that if you are one of the lucky ones to not have suffered a heart attack or any of the other covered conditions, you can get all the premiums back at policy expiry.
5) Return of premium upon death.
Similar to above if you don’t survive the required 30 survival period and your policy has the return of premium upon death option in it, your survivors will get all the premiums you have paid into the policy
6) Critical illness insurance can help protect some of your assets
If you survive a covered condition and you get the lump sum check from the insurance company. You are free to use the money as you wish. Just imagine if you did not have that policy in place, how would you survive financially. You may have to dig into your RRSP or other investments to pay some of the bills. Worst case you may have to sell your house because you can not make the mortgage payment. So this policy helps you protect some of your assets.
7) Young age and good health means better rates.
It helps you to get better rates when you are young and in good health, and your parents and siblings have not suffered any major conditions.