Is critical illness insurance worth it? 

Is critical illness insurance worth it? 

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Pavy Zajdner| 980 words | Reading Time: 5 minutes  | Date: 2023/05/19

Critical illness insurance covers an individual against illnesses such as heart attack, stroke, bypass surgery, and cancer and can be bought in terms of 10 years, 20 years, to the age of 75 or the age of 100. Critical illness is usually recommended for those who are self-employed or don’t have benefits coverage or insurance through their work.  

There also a variety of riders such as:  

  • a return-of-premium rider where you can get your premiums back if there was no critical illness claim made after a certain period of time 

  • a second-event rider, which offers limited coverage if you are diagnosed with a second critical illness 

  • disability waiver-of-premium rider - which waives your premium payments if you've been totally disabled for 90 days. 

So what do premiums look like for critical illness insurance?  A monthly premium for a 10-year, $100,000 policy for a 40-year-old non-smoking male, for example, is $70 on average or $840 a year. It costs on average $100 a month for a 50-year-old male non-smoker, or $1,200 a year. 

The lump sum payment that you receive through a critical illness policy is tax-free and can be used for anything you want such as taking time off work, paying the mortgage and car payments or even traveling abroad for treatments not covered by your government health plan. It can also help you reduce debt and other financial concerns while you cope with the illness.  

The other way to protect against financial problems arising from a critical illness is to set aside savings equal to three to six months of income saved. However, for those who do qualify for insurance, a critical illness insurance policy with at least a $50,000 lump-sum payout can help them get through the period they'd be off work and focus on recovery instead of worrying about how to pay the bills or the mortgage.  

The right critical illness solution for you depends on your immediate needs and long-term goals.  There are a number of factors to consider when purchasing a critical illness insurance policy.  Premiums shouldn't be the sole deciding factor, as different insurance carriers cover different numbers of critical illnesses, which vary considerably in what they cover and how much they cost. There are also exclusions – as many insurers have recently made changes to what they will and will not cover such as early-stage cancers and neurological diseases such as dementia.  

Riders such as return-of-premium often stipulate that a person must pay premiums for 15 or 20 years before the money is returned.  When adding a critical illness rider to your life insurance policy, most insurance companies also offer a discount for purchasing two or more types of coverages together.  

If you were diagnosed today, what would be your immediate concern?   

How would having a tax-free lump sum of cash help you and your family?  

A licensed life insurance advisor can help you decide what type of critical illness insurance policy is right for you based on your budget, needs and concerns since not all critical illness policies and riders are created equal.  For more info, please visit here.

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FAQ for critical illness insurance:

1- Is critical illness insurance worth it? 
The worth of critical illness insurance depends on your individual circumstances and preferences. Critical illness insurance provides coverage against serious illnesses like heart attack, stroke, and cancer, offering a lump sum payment upon diagnosis. It is often recommended for individuals who are self-employed or lack benefits coverage through their work. Consider factors such as your health, family history, financial situation, and existing insurance coverage when determining if critical illness insurance is right for you. 
2- What are the benefits of having critical illness insurance? 
Critical illness insurance offers several benefits. Firstly, the lump sum payment received upon diagnosis is tax-free and can be used at your discretion. This can help cover medical expenses, replace lost income during treatment, pay off debts, or even support lifestyle adjustments. Critical illness insurance can provide financial security, allowing you to focus on recovery without worrying about bills or mortgage payments. It complements savings and other forms of insurance coverage, offering a specific safety net for critical illnesses. 
3- What should I consider when purchasing critical illness insurance? 
When purchasing critical illness insurance, it is important to consider various factors. Look beyond premiums alone and examine the coverage provided by different insurance carriers. Each insurer covers a different range of critical illnesses, and their coverage and costs can vary significantly. Pay attention to exclusions, as insurers may have limitations on what they cover, such as early-stage cancers or specific diseases. Additionally, evaluate the available riders, like return-of-premium or second-event riders, and consider how they align with your needs and long-term goals. 
4: How can a tax-free lump sum help me and my family in the event of a critical illness? 
A tax-free lump sum received through critical illness insurance can provide crucial financial support to you and your family. It can help cover immediate expenses, such as medical treatments, mortgage payments, and daily living costs, especially if you need to take time off work to focus on recovery. The lump sum can also be used for additional treatments not covered by government health plans or to reduce debt burdens. Having this financial cushion relieves the stress of managing expenses during a challenging time, allowing you to prioritize your health and well-being. 
5- How can a licensed life insurance advisor assist in choosing the right critical illness insurance policy? 
Consulting with a licensed life insurance advisor is beneficial when selecting a critical illness insurance policy. They possess expertise in insurance products and can guide you based on your budget, specific needs, and concerns. An advisor can help you understand the varying coverage options, compare policies from different insurers, and determine the most suitable plan for you. Their assistance ensures that you make an informed decision tailored to your circumstances, maximizing the benefits of critical illness insurance. 

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Pavy Zajdner
Life Insurance Advisor

Allen Wong & Associates, Bridgeforce Financial  
Ph:  519-282-9801

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