permanent individual critical illness insurance policy

Grouped Individual Critical Illness Insurance

Canadians are concerned with the future of the health care system. They worry that more of the health care cost will shift to the disabled and their families. Critical illness insurance provides a hassle free way to provide liquidity to meet the financial needs during a medical crises.

Why is Critical Illness Insurance Necessary?

disability insurance replaces income but is insufficient for the added burden of medical expenses
group health coverage has restrictive limitation and maximums
social medical care is eroding and cannot be relied on
personal and retirement savings have intended purposes other than medical expenses
long term care insurance is too restrictive and inflexible
most critical illness victims make a full recovery after a lengthy expensive treatment period

Canadian Statistics

1 in 2 will contract heart disease
1 in 2 heart attack victims are under age 65
1 in 3 will develop some form of life threatening cancer
1 in 4 currently suffer from cardiovascular disease
70% of open heart surgery operations each year are coronary bypasses
1 in 4 will suffer kidney failure
1 in 20 run the risk of having a stroke before age 70
1 in 500 people will suffer from multiple sclerosis
heart attack, cancer and stroke are the 3 most common diseases of the 90s
1 in 4 will contract cancer or heart disease before they retire
2/3 of the cost of cancer treatment is not covered by provincial medical plans
30% of cancer victims are completely cured
75% of stroke victims survive the initial occurrence
95% of heart attach victims survive the initial occurrence

Conditions that Could be Covered

Cancer (life-threatening)
Heart Attack (myocardial infarction)
Stroke (cerebrovascular incident)
Coronary Artery By-pass Surgery
Multiple Sclerosis
Kidney Failure (end stage renal disease)
Major Organ Transplant (recipient of heart, lung, liver, pancreas, kidney or bone marrow transplant)
Paralysis (2 or more limbs)
Deafness (total & permanent)
Blindness (total & permanent)
Parkinson’s Disease
Alzheimer’s Disease
Motor Neurone Disease
Permanent Total Disability
Severe Burns
etc.

How Critical Illness Insurance Works

select an amount of coverage from $50,000 to $300,000
provide medical evidence of good health
authorize payroll deductions for as long as you want the coverage
claim the full amount of insurance if you survive a covered event by 30 days (paralysis has a 90 day assessment period in the event of an accident, otherwise paralysis has a 180 day assessment period; paralysis resulting from intentional self-inflicted injuries is excluded)
convert to an individual policy when you leave the group

Taxation

claim payments are received tax-free
employee contributions are not tax-deductible
employer contributions are taxable income to employees
premium attracts PST in some provinces

What to look for in Critical Illness Coverage

clear definitions (medical terminology)
no restrictions at time of claim (no HIV exclusion)
comprehensive scope of coverage
short elimination period (30 days)
lump sum benefit payment
liberal underwriting

Why Group Critical Illness Coverage

This is such a new product and insurers are careful not to be too aggressive in plan design or pricing. As they gain experience and critical mass they will improve the value for members. The first Canadian plans covered less than 10 events and now cover 16 events. Critical Illness insurers in the United Kingdom now cover 27 events in insurers in Malaysia cover 36 events. We can expect a few new events to be added annually. A group policy can be improved annually to attract new participants and retain existing members. I you buy individual coverage than the only way to benefit from product improvements is to apply for a new policy every time a coverage enhancement becomes available.

One method of providing value while hedging is for the insurer to provide a premium refund to members based on the profitability of the product.

Group plans are designed to allow members to purchase (not be sold) coverage in a manner that reduces the distribution costs (commissions) and administration (premium collection) costs. Ideally members would be able to continue to their coverage on a direct billing bases even after they no longer belong to the group.