Critical Illness

Critical illness insurance was not designed by an insurance company. It is a product that was designed by world-famous heart surgeon Dr. Marius Barnard.  Dr. Barnard was a transplant surgeon and after saving many patients’ lives, he saw them surviving only to experience stress and hardship financially. This was the result of their illness, treatments, and length of recovery time. After witnessing such devastation in the lives of his patients, he lobbied insurance companies to create a product that pays a lump sum benefit depending on the patient’s diagnosis. Thus, critical illness insurance was born.

My grandmother, mother, sister and a few close friends have all needed to brave the journey that cancer suddenly thrust upon them. Approximately one out of two people in Canada will experience a cancer diagnosis in their lifetime. This is alarming and is affecting many people at younger ages. While the greater challenge for us as a society is to address the root causes of the cancer crisis, in the immediate moment we also need to be realistic about the likelihood of someone in our family being diagnosed with cancer or another serious illness. One of the ways to be prepared is to ensure your family has critical illness insurance. It is important to put this in place as soon as possible. As my sister has so graciously allowed me to share, she was diagnosed at the age of 33 with melanoma. Many people might think 30 is too young to need critical illness insurance, but cancer can strike at any age and some cancers are more likely at younger ages. The good news is more and more people are surviving. Critical illness insurance can be a key support in the survival journey. 

I believe this is the most important insurance of our time and feel strongly that everyone would benefit from having this protection. I want to help you understand what it is and how it can work as a savings tool while also protecting you from financial stress during a time of illness and recovery. I own this product personally and if I do not end up getting a critical illness by the time I am 75, I will receive all my money back in my retirement. I will have saved money and been protected at the same time. This insurance can also be used to save for your children, be prepared in case of a child illness, and protect their insurability as adults. Buying an affordable critical illness insurance policy for a young child is a brilliant option and excellent gift for a parent or grandparent. Overall, this is an affordable option for families that would not otherwise have the savings or assets to liquidate in order to pay for additional financial costs of a health crisis in the family.

 Even if you do have the financial means, why worry about selling assets or draining savings or needing money earmarked to deal with a critical illness? Using the insurance company to cover your risk keeps more money and assets in your control.

 

Commonly Asked Questions

Critical illness doesn’t just cover cancer, although the cancer conversation is very close to my heart. Critical Illness Insurance covers different things depending on the insurer you deal with. The most comprehensive plan covers the following:

  • Acquired brain injury, aortic surgery, aplastic anemia, bacterial meningitis, benign brain tumor, blindness, congenital heart disease (on child policy), cerebral palsy (on child policy), cystic fibrosis (on child policy), coma, coronary artery bypass surgery, deafness, dementia (including Alzheimer’s disease, on adult policy only), heart attack, heart valve replacement or repair, kidney failure, life threatening cancer, loss of limbs, loss of speech, major organ failure on waiting list, major organ transplant, motor neuron disease (adult policy only), multiple sclerosis, muscular dystrophy (on child policy), occupational HIV infection (adult policy only), paralysis, Parkinson’s disease and specified atypical parkinsonian disorders (adult only), severe burns, stroke, type 1 diabetes mellitus (on child policy), loss of independent existence.

You can also receive partial payment for early stage critical illness as well. Some policies will deduct from your overall coverage to pay you an early amount while others will pay you an additional amount on top of your insured amount. Examples of early payout conditions are:

  • Coronary angioplasty, ductal breast cancer in-situ, early chronic lymphocytic leukemia, early prostate cancer, early thyroid cancer, gastrointestinal stromal tumors, Grade 1 neuroendocrine tumors (carcinoid) and superficial malignant melanoma.

*Once a critical illness benefit becomes payable some companies, such as Canada Life will also make a charitable donation as directed by the owner to an approved organization.

Unlike life insurance, critical illness insurance pays you a lump sum amount tax free when you are diagnosed. For some of the mentioned illnesses like cancer there may be no waiting period for survival. When you are diagnosed, you receive a tax free payout immediately. For most other illnesses, there is 30-day survival period. For an acquired brain injury there is a 180-day survival period, which is related to the time it takes to receive a correct diagnosis of what you have. In all cases, you are given a lump sum, tax free cheque to deal with what you are suddenly facing.  Just like you would choose how much life insurance you want, you choose how much critical illness insurance you want. This insurance can be harder to qualify for than life insurance. For example, you may be very healthy, but your family history, like mine, may have multiple family members who have had one of the twenty-six illnesses listed. Family history plays a major role in your ability to qualify for this insurance. About half the people that apply for this are either declined or rated (pay more for the same amount of coverage because of your risk). I am a much higher risk because of my family history so I pay more money for the same amount of coverage. However, I still find what I pay in relation to what I get worth it. I brings me a great deal of peace of mind to know that even though I am a higher risk, I am covered. I also feel good about it all going towards a retirement savings if I do not use the coverage by the end date I have in place.

At a minimum, choose what you would earn in 1 year of work. Anytime you have an illness that requires treatment, such as chemotherapy, you typically will be unable to work for at least a year, if not more. Therefore, I recommend choosing coverage for at least a year’s worth of your income. For someone who knows they are at a higher risk of certain illnesses due to family history, you may want to also consider a higher coverage. That’s what I did. I am at higher risk due to the many cancers in my immediate family. Knowing this and having seen my mom and sister need long periods of time off work for treatments and recovery, I have opted for an extra amount of coverage. I also pay higher premium rates due to this family history. Although the ideal coverage is at least 1-year’s salary, you may need to adjust the amount based on what you can afford. Premiums vary depending on your risk level, which is determined by medical underwriting and family history.

As you consider what you can and cannot afford, I urge you to take into consideration that critical illness insurance does not need to be an added expense. Rather, you can reallocate retirement savings into this product. If you choose a long-term policy and return of premium rider, you will get all of your critical illness insurance premiums returned to you at the end of your term (in retirement), provided you do not end up needing the payout due to an illness. Premiums are more expensive for longer term policies and there is an added cost for the return of premium rider. The best policies are not the inexpensive ones with a short-term outlook. With a long-term perspective, the more expensive policies become the smarter financial choice. This is because with a short-term policy, while your premiums will initially be less, as you age and renew your policy, your premiums will increase substantially. In comparison, the premiums for a long-term policy never change. Therefore, with a short term policy you will end up spending more money renewing the shorter terms than if you simply chose a long-term policy to begin with. For this reason, I highly prefer long-term policies.  Like life insurance, there are creative options we can implement if you are a business owner as well.

I have shared a lot about saving for retirement while being protected. Let me explain this further. My favorite way to pay for this insurance is to do it with the return of premium rider. This means that every month or year that you are paying for this insurance your money is not gone or lost forever. You get it all back if you never make a claim. If you end up not needing your payout, you get every single penny back. There are different ways to structure this. Some give your money back sooner, some later, some at death. We can discuss what is right for you. However, I have found in most cases having something in place until or just after retirement is most beneficial.

There are various ways to structure this product and having these options accommodates a wide range of people. We can discuss and price out the different options.

A common question is how much does the return of premium rider cost? It varies depending on age, how much coverage you are getting and how long your term is. If we look at a standard 35-year-old non-smoking female, Jane, who puts $100,000.00 of coverage in place with a level premium (same monthly or annual cost) until she is 75, she would be paying about $121.23 per month for her policy.* To add the return of premium rider in this scenario is an additional $39 per month. Assuming her tax rate is 30.5% and she wanted to withdraw her premiums at age 65 to use in retirement, Jane would have needed to earn a before-tax equivalent of 9.65% every year on the $39 return of premium rider amount to have it equal the same value as getting it all back at 65. Over the course of 30 years from age 35 to 65, Jane would have spent an additional $14,094 to pay for the return of premium rider to collect back 100% of her total premium of $43,643, if she never needs to make a claim.

*Canada Life Life Advance (Level Term to 75) with Loss of Independent Existence and Return of premium at age 65 or expiry. $100,000 of base benefit shown in the example. Rates are based on standard, non-smoker female and current as of August 2, 2019.

If a parent buys critical illness insurance for a child in good health any time before they are diagnosed with a serious illness, the parent will get the lowest insurance rates possible for the child policy. When the child is 25 years old, if he/she did not have a critical illness, all the money the parent paid into this policy will be returned to the parent, meaning the policy acts as a child savings plan.

 

In addition, the best child critical illness insurance policies have an option for a child policy to be converted to an adult policy at the age of 25. The significant benefit of this is that the young adult does not have to undergo any medical underwriting or share any family history of illness. Instead, the young adult automatically receives the lowest premium rates available. The only question affecting premiums for a young adult in this situation is whether or not they are a smoker. This means the parent who chooses to insure a young child is giving them not only protection for their childhood but is also guaranteeing them the option of affordable adult insurance coverage for a lifetime.  As you age, your risk for illnesses and declining health increases, as does that of your parents (the child’s grandparents). Typically, insurance companies assess the parents’ and grandparents’ health as part of determining insurance rates. Getting an insurance policy for your children when they are very young means you are most likely to be in good health. This gives your child the greatest chance of affordable insurance through their life, regardless of how your own health (or that of your parents/child’s grandparents) changes as you age. From this perspective, a child critical illness insurance policy is also a great gift option for grandparents who may have the financial ability to insure a child and give them this freedom from being rated based on family history if they were to wait to get insurance as an adult.

It is so wonderful that my family allows me to use their personal stories for the purpose of helping others. When diagnosed with breast cancer, my wonderful mother had access to this amazing service. Depending on what you are diagnosed with, the best doctor’s program will tell you who the best doctors in the world are for your specific diagnosis. They will then have the actual tissue biopsies sent to be examined, assess the diagnosis and also the treatment. In my mom’s case she was very lucky as one of the doctors on the best doctor list was right here in Edmonton at our very own Cross Cancer Institute. However, it still relieved stress to have a second opinion. Getting diagnosed with a life-threatening cancer is scary to say the least. Knowing you have the correct diagnosis, treatment plan, and having it checked out by other world-renowned physicians for a second opinion is extremely reassuring. In some cases a different diagnosis or treatment plan is recommended.

Founded in 1989 by Harvard Medical School physicians, Best Doctors serves more than 40 million members in countries across the world. For more than 28 years they have been identifying and solving the most complex, critical and costly problems in health care by combining data analytics and top clinical talent with their highly personal methodology across a global network. Today, their independently certified network has more than 50,000 medical experts in over 450 specialties and subspecialties. Through this network you can access a range of services, support and expert medical specialists who can help you or a loved one get an accurate diagnosis and better understand medical conditions and treatment options. During the life of the policy, you can use these services at any time for any medical condition, not just for conditions included as part of your policy. You can also use these services for your spouse and children even if they do not have their own policy.

What my family found invaluable was the counselling and support services from Shepell. How do you tell your child you have cancer? That life is going to look different for the next year as you go to get treatments. What will it look like and how will it impact your family? How do you share this with them? Shepell offers professional counselling services, family support services, legal and financial consultation, registered dietitians, wellness website, online smoking cessation services, and an online stress management tool. This is all a part of the coverage you have. Counselling alone can cost up to $200/hour making this an extremely valuable benefit. It is all included with your policy.

madison helping mommy I personally spoke to a counsellor from Shepell when my sister was diagnosed. I have two children I had to explain things to as my sister stayed with us to get treatment in Edmonton. My sister and her husband had to explain to their (at the time) two-year-old that mommy had to go to Edmonton often and sometimes stay there for a while. Sometimes she would come and sometimes she would stay with daddy. It was the counselling at Shepell that told them to be honest with their daughter and share with how that mommy is sick. I think for most parents we want to protect our children; this could include not telling them what is going on. The counsellor said truth builds trust and it is OK to tell your children. This led to an increased level of closeness as a result. One of my favourite pictures of that time is of my niece, Madison, dressed up in one of her best princess dresses taking mommy for her melanoma medicine at the Cross Cancer Institute. The nurses even let her help, wear gloves, put on Band-Aids, including giving “needles” (Madison used her own doctor kit for this of course). Madison was able to be a part of what happened with mommy. She wasn’t scared. Rather she embraced this new reality, as did we all and it brought us all closer together. The support from the counselling was amazing. It made the difference in how the journey was approached.

As with all insurances, critical illness insurance can be corporately owned or individually owned. Yet, critical illness is rarely offered in a group benefit plan, and if it is, the average payout is only $10,000. Owning a critical illness policy individually gives you more options and stays with you whether your job or broader health benefit plan changes. It is not possible to add on a return of premium when critical illness insurance is part of a group benefit plan. You are only covered while you are employed and once your employment ends you will get nothing back. It is only when you own your own plan that you have the option of getting back all the money you put into your insurance product. As individual plans will vary, I will help you put in place the most comprehensive plan available to you.