I recently encountered this question “I’m a new parent, and I’m considering buying Critical Illness insurance to make sure my family wouldn’t be financially impacted if I got sick. What should I consider when looking at these policies?” This is a common concern among new parents, who are keen to ensure their family’s financial stability. In this blog, I will share my response to this question.
Parenthood often prompts us to think more deeply about financial security, so you’re on the right track.
Prioritizing Disability Insurance:
I personally think that it may be best to consider Long Term Disability Insurance first. Why? It’s a comprehensive coverage that protects your most valuable asset – your ability to earn an income.
Statistically speaking, RBC’s claims data shows that 66% of Critical Illness claims are for Cancer, while only 11% of Disability Insurance claims are for Cancer. Disability Insurance covers a wide range of conditions, from Musculoskeletal Disorders to Mental Health issues, which aren’t covered under a Critical Illness policy.
Role of Critical Illness:
If you already have sufficient Disability coverage, then Critical Illness insurance could supplement that coverage. Having extra financial support during a difficult time may help reduce stress and let you focus on recovery. Critical Illness insurance can help a loved one take time off work or pay for additional care not covered under government or group benefits.
When it comes to what to look for in Critical Illness, a good broker can help you compare different carriers. The most important element would be the definitions within the contract, good news here is that most carriers use the standardized definitions developed by the Canadian Life and Health Insurance Association (CLHIA).
Key Factors in Choosing Critical Illness Insurance:
Selecting the right Critical Illness policy involves several considerations:
- Some carriers cover Acquired Brain Injury, many do not.
- Most policies will provide an “Early Assistance Benefit” which pays out in the event one is diagnosed with Early-Stage Cancer. The payout ranges between 10% to 25%, depending on carrier.
- Some contracts will pay out multiple times (for separate incidences of early-stage cancer) where other contracts will only pay out once.
- Some contracts will reduce the face amount (original coverage amount) when there is an early assistance payout, where other contracts will not.
- Some carriers offer a conversion to Long Term Care, which may be important to some since Long Term Care is no longer sold on a stand-alone basis – meaning you can only access via conversion.
- Some carriers offer a paid-up option, meaning you pay for a limited number of years, then you have the coverage forever.
- Some policies only cover 4 conditions, others will cover typically 25 conditions.
- Some policies include “Loss of Independence” as a covered condition, other policies you need to include as a rider if you want it.
- Some policies offer Return of Premium (ROP). If considering, you should find out what rate of return you would need if you decided to invest the difference in cost of premium (with and without ROP) yourself.
Having a broker complete a proper needs assessment to help you understand your options will enable you to make an informed choice that best suits your family’s needs.
As a new parent, ensuring your family’s financial well-being in the face of health challenges is a top priority. Understanding the intricacies of Critical Illness and Disability Insurance is key to making a decision that offers both security and peace of mind.
If you’re a new parent thinking about insurance options, let’s have a conversation. I can provide a detailed assessment to help you choose the right protection for your family’s unique circumstances.