Tuesday, June 19, 2007

Personal Risk Management

People insure themselves and their belongings for various types of risks: Theft, Fire, Accidents, Injury, Death, and Illness. Some things are more likely to happen than others – death for example – 100% chance versus a very low chance of - say - a meteor strike!

In recent years, it has become possible to insure yourself for major illnesses so a lump sum of cash becomes available should you suffer a major illness – this type of insurance is called Critical Illness Insurance. Available in Canada only since 1996, Critical Illness insurance was devised by a pioneering heart surgeon who was concerned that the post-operative stress caused from the financial burden associated with recovery was killing his patients.

Unlike long-term disability coverage that will pay out only in the case of protracted recovery periods, Critical Illness policies will pay a lump-sum non-taxable benefit, usually 30 or 60 days from the onset of any one of certain specified medical conditions, diseases or ailments. No extended convalescence or proven disability is required to collect; only the fact of diagnosis is required. The funds can be used for any purpose - to supplement lost income, take early retirement, pay off a mortgage or other debts or defray the expenses associated with medical treatments, recovery or rehabilitation. If death occurs within the waiting period, the premiums paid will be refunded to a named beneficiary. Some plans will return premiums paid if the contract matures without a claim.

The covered diseases typically include such things as: Heart Attack, Cancer (including stage A prostate & colon cancer), Paralysis, Multiple Sclerosis, Major organ transplant, Coma, Loss of Speech, Stroke, Parkinson’s, Kidney Failure, Alzheimer’s, Severe Bums, Deafness, Coronary Bypass, Blindness, Loss of Limbs, Occupational HIV Injury, Motor Neuron Disease
Some insurers offer a choice between basic and enhanced coverage options (Heart Attack, Cancer, and Stroke). These policies are finding favour particularly with older workers, who are enjoying their prime earning years at the very time that, statistically, they are more prone to serious illnesses such as heart disease, cancer and stroke.

Financially, it can be prudent to insure yourself for such risks if you are the main income earner for your family, if you would suffer a significant setback in earning potential should you become severely ill with a possibly long recovery period, and if you would like to have the peace of mind that your finances would not suffer unduly should you become quite ill.

Personal disclaimer: My wife and I personally have critical illness insurance policies insuring us for 22 major illnesses. This provides us with peace of mind and it is quite reasonable - relatively speaking. I do not sell or receive compensation for the sale of insurance policies.

4 comments:

RentingSucks said...

If you buy this type of insurance pay attention to the preexisiting condition clause.

For example if you have heart problems and you had a heart murmur the heart murmur counts as a preexisting condition and you won't be covered.

If your a diabetic you probably won't be covered for anything.

mohican said...

You are completely correct rs. This type of policy is not available to every person and the underwriting rules are stricter than for life insurance.

There are many situations where it would be extremely cost prohibitive or completely unavailable.

That said, a critical illness policy can be quite useful as a risk management tool in many situations.

Speaking to a qualified insurance advisor and getting quotes from multiple companies is recommended. You can get some basic info online at www.kanetix.ca

freako said...

" if you would suffer a significant setback in earning potential should you become severely ill with a possibly long recovery period, and if you would like to have the peace of mind that your finances would not suffer unduly should you become quite ill.
"

Just a heads up. I had a close relative come down with serious illness which caused them to be unable to work for some time.

The good news: There was long term disability insurance.

The bad news: They are friggin as*holes to deal with. And I mean friggin AS*HOLES. Think collection agent, but worse since you can't hang up on them if you want to get paid. This was a very well documented illness, supported objective evidence and multiple specialist opinions. The payments eventually arrived, but at no small emotional cost.

If you happen to have an illness which is hard to physically document, (ie. stress or mental health related) I can only imagine.

If anybody has seen Memento, you may have an idea.

freako said...

Good advice by the way.