Covering The Cost Of Critical Illnesses
Industry News How critical illness insurance and financial planning can provide assistance in the event of a life-threatening illness.
There is no such things as a “good time” to get sick. According to the Canadian Cancer Society, two out of five Canadians are expected to develop cancer during their lifetimes. And the number of newly diagnosed cases continues to increase each year.
Life-threatening diseases affect everything from your health to financial situation. Medications, lost income, and other unexpected expenses are all side effects of serious illnesses. Often people don’t consider who will be picking up the tab.
“People have this misconception that if they become sick, the provincial plan covers them for everything they need, and that’s not true, “ says Canadian Life and Health Insurance Director Laurie Down. “That’s why we need to have extra coverage in place to help us with those things.”
Critical illness insurance, launched in the mid 1990s, is designed to offer that little bit of extra assistance. Depending on the provider, this living benefit covers a variety of “critical illnesses,” such as cancer, stroke, or even organ transplant. Upon diagnosis, clients who purchase critical illness insurance receive a lump sum, typically $10,000 to $50,000 or more, which can be used at their discretion.
There is a growing interest in this type of insurance in Canada. In 2009, 1,472 critical illness insurance claims were filed and the average payout was more than $78,000, according to a study by Munich Re. There are more than 640,000 critical illness policies currently in force in Canada.
According to Down, critical illness insurance is a key component to comprehensive coverage. “It’s a piece of the puzzle — a part of all the insurance protection you need,” she says.
Keeping it simple
While critical illness insurance is meant to simplify the financial burden on patients, IA Excellence VP Charles Parent says the complicated selection process can intimidate consumers. With companies adding more illnesses to their roster of coverage, Parent says, “the product is starting to be more comprehensive, but also more complex.”
Studies show that with more options available, consumers became more confused about critical illness insurance. Since there is no standardized list, some products offer coverage for up to 25 conditions — each with its own set of limitations — making it hard for customers to compare policies.
“Consumers may be somewhat reluctant to buy critical illness insurance because they feel that critical illness policies may not pay due to the limitations and exclusions within the policy,” says Parent.
As a result, IA Excellence chose to simplify this type of insurance and offer a cancer-specific product — in part because more than two-thirds of critical illness claims are related to cancer. “Everybody knows somebody who has cancer,” says Parent.
A prescription for piece of mind
It’s the type of product that no one ever wants to have to use, but Down explains as we and our families grow, so do our coverage needs. Critical illness insurance can help with, “all those extra expenses you don’t think about until you’re in that situation and you realize how much illness really costs you.”
Critical illness insurance and cancer-specific insurance are both living benefits that provide lump-sum payments in the event of a diagnosis, but according to Down, these types of insurance provide more than just funds.
“Simply put, critical illness insurance gives you piece of mind at a time when you should be concentrating on your recovery,” she says. “It’s comforting to know extra money will be available to you to use for whatever your needs may be if you are stricken with a critical illness.”