Enhancing Your Benefits with Critical Illness and Disability Insurance
March 15, 2023
Did you know that medical expenses currently rank as the number three cause of bankruptcy in Canada? Despite this, critical illness insurance (CI), which can help offset medical costs, often gets overlooked for other types of coverage like life insurance.
If faced with an unexpected illness, disability coverage, whether part of a group plan or even as a stand-alone policy, generally will not cover your full income. This is a concern since out-of-pocket expenses typically increase anytime something medically prevents someone from working for an extended period of time. Likewise, any additional supplemental costs may only partially be covered by your health insurance – depending on your coverage. The truth is that in the event of an unforeseen illness, you could be faced with a shortfall, even with full disability coverage. This is where critical illness coverage comes in.
Below are some factors to consider when deliberating on whether to bundle critical illness coverage with your disability insurance:
I already have disability insurance, do I also need critical illness insurance?
You already have DI coverage – that’s great! However, since they are fundamentally different products with different claim triggers, consider the possibility of claim for each. Would the disability pay out if the illness returns you to work before the elimination period? Would the critical illness pay out if you are off work due to an injury? Even if one pays out, will the income be sufficient? If both policies paid out, it wouldn’t be the worst thing that happened, and it would also help to support any increase in monthly expenses, whether caused by inflation or unexpected medical expenses. It’s important to remember that despite the overlap, both products cover off very different needs.
Critical illness insurance is expensive!
Insurance companies price their products according to risk. If there’s an elevated risk, you can expect higher premiums, whether it’s related to age, health status, or in this case the product having a higher claims rate. The best approach where affordability is an issue, is to try to fit it into your budget at a price point you’re comfortable with. A viable option is term insurance for critical illness. Compared to life insurance renewals, the premium renewal jumps can be relatively smaller and there are cases where the first renewal cost is LESS EXPENSIVE than a newly attained age quote. It’s an option.
How much critical illness insurance is enough?
There is no right answer to this as there are so many moving parts within critical illness such as recovery period, cost of procedures, medication, and unpaid leave from work, etc. One could estimate CI needs by estimating income (for example, 1 to 2 times your or your spouse’s annual salary), your expenses over a fixed period, or whatever fits your budget. Regardless of how you calculate your needs, some CI coverage is always better than leaving yourself at risk – even $10,000 could mean the difference (and relief!) between when your income ends and your disability coverage begins.
I will self insure.
Using personal savings, family income, or taxable investments such as RRSPs may seem like a good idea, but typically it becomes the more costly way of dealing with additional expenses. Using your own dollars is never the best option.
Nothing is going to happen to me.
We sure hope not, but statistics and life tell us otherwise and you don’t want to be left vulnerable in the case of an unexpected illness. Try this Strengthening Your Safety Net with Critical Illness Insurance calculator to discover the likelihood of some commonly known risks actually occurring. Risks are inevitable and it’s important to build your safety net today for all of your tomorrows.
If you have any questions or are interested in more calculators and tools to help you learn more about the benefits of insurance, let us know!