How critical illness insurance can get you through tough times
A major illness can devastate one’s finances. Here’s how insurance can help you stay afloat.
People generally don’t expect to get sick; it’s much easier and less stressful to go through life without worrying about falling ill.
But things happen, and in an instant, a critical illness event like a cancer diagnosis, heart attack or stroke can throw your world – including your employment, mobility, personal care needs and family life – into disarray. According to the Canadian Cancer Society, an estimated 604 Canadians will be diagnosed with cancer every day this year.
While nothing can prepare someone for cancer, heart failure or another major illness, it is possible to reduce the financial fallout in the event you get too sick to work. How? By purchasing critical illness insurance.
Unlike life insurance, which pays out upon the death of the insured, or disability insurance, which pays a person who is too ill or injured to work a percentage of monthly income over a certain period of time, critical illness insurance pays out a lump sum to people who suffer from certain illnesses. The payout, isn’t tied to income, and recipients are free to use it how they see fit.
“If someone is diagnosed with a critical illness, the last thing they want is to think, “How am I going to pay to cover my expenses?’” says Lorne Marr, director of new business at LSM Insurance, an independent broker based in Markham, Ont.
Illnesses certainly come with a cost. Medical treatment bills, in-home care, home modifications and hospital parking, among other things, can leave Canadians on the hook for thousands of dollars. Pair that with potential income lost from an inability to work for a stretch of months or years, and it’s a recipe for financial strain.
Critical illness insurance, though useful, is much less known and less utilized than life and disability insurance, says Marr. That’s partly due to people not wanting to think about things like heart attacks, strokes or cancer – out of sight, out of mind. But it’s also because the product is newer – it’s only been around since the 1990s – and it can cost more than life or disability insurance.
However, there are certain groups of people who might not qualify for disability insurance, while others might find critical illness insurance more appropriate for their situation, explains Marr.
For instance, stay-at-home parents with no income to replace may find critical illness insurance a better fit. While those who work seasonal labour jobs, like landscaping or snow removal, may find disability insurance premiums relatively expensive since they’re more susceptible to injury, even if they’re buying it to protect against an illness. In Marr’s experience, critical illness premiums for everyone, whether you’re a doctor or a labourer, are mostly the same, though he says they vary based on people’s health, smoking status and family histories.
Like with life insurance, it’s a good idea to consider buying it when you’re young, as the healthier you are, the less you’ll have to pay for coverage, he adds. As for how much you should spend, it’s a matter of personal budget and preference. Some brokers suggest those with tight budgets allocate enough to get through a four-to-six month period, while higher income consumers might choose to stow away more than that; it’s a discussion you should have with an experienced broker.
A difference maker
Jack Bendahan, a senior insurance broker at LSM, learned first-hand how valuable critical illness insurance was long before he started selling it.
About 15 years ago, Bendahan’s parents and in-laws, all in their 50s, ran into illnesses seemingly at once. His mom was diagnosed with cancer, while his father underwent quadruple bypass surgery shortly after. At roughly the same time, Bendahan’s partner’s father was diagnosed with lung cancer and was told he had six months to live.
Bendahan was rightfully overwhelmed – fortunately, his parents both recovered – but he was grateful his mother-in-law had purchased a critical illness policy.
“It was quite small, about $20,000, but it made a world of difference,” he says.
The family used the money to take one final vacation together.
“It wasn’t the most ideal vacation, but it allowed them to create memories one last time,” he says. His mother-in-law also used the payout to take time off work to care for her husband.
So when Bendahan took a job in insurance in 2005, he purchased a critical illness policy for himself – enough to cover up to two years of income. Many people don’t see the benefits of critical illness when they and their loved ones are healthy, he explains. It’s only when a family member gets sick, that people call.
“They see the repercussions and now they want to at least check out what’s available,” he says.
Ultimately, critical illness insurance is meant to make a tough time a little less stressful, both financially and personally. That’s not just good for your bank account, but your health, too.
“Stress is the last thing you want when diagnosed with an illness,” says Marr. “That’s only going to hinder your recovery.”
The opinions presented are not necessarily those of The Canada Life Assurance Company and are provided for informational purposes only, your circumstances may be different.
To learn more about this product and if it’s right for you, contact a licensed insurance advisor.