Following last week’s column on the basics of critical illness, several additional questions were asked.
Q. What happens if the person insured for critical illness passes away before the benefit is used? – Shane B.
A. Critical illness insurance pays a lump sum benefit after the diagnosis of the first occurrence of a critical illness and after the insured person survives the specified waiting period (usually 30 days.) Many companies offer an optional rider that will return the cumulative premiums on death of the insured if the insured’s benefit has not been used.
Q. How much does critical illness insurance cost? – Ann R.
A. The cost of critical illness insurance depends on factors such as age, gender, smoker status, current health status, height, weight, lifestyle and medical and family history. Here are sample monthly premiums for $100,000 of critical illness coverage that is a level cost to age 75 for non-smoker individuals:
Female
age 40 $75.06
age 50 $119.07
Male
age 40 $88.92
age 50 $156.15
Q. Can I use the critical illness insurance lump-sum benefit to pay off my mortgage or other debt? – Bob B.
A. One of the benefits of critical illness insurance is the flexibility it provides in how the benefit is used. Funds are advanced tax-free and can be used in any way you want. The choice of using the funds to pay off the mortgage or other debt is yours.
Q. What happens to my lifestyle and savings goals if the breadwinner of the household becomes disabled and unable to work? How do I get disability insurance and what does it cover? – George B.
A. Knowing the answers to these questions and taking appropriate action depending upon personal circumstances, means the difference between the peace of mind that comes from having a financial safety net in place, or potential hardship due to a lack of financial planning.
Insurance is a cornerstone of any financial plan. In the event that an insured individual becomes disabled and unable to work, disability insurance provides a benefit, usually 60 per cent to 70 per cent of salary, after a specified waiting period. Depending upon the type of coverage, the benefit period could last months or years. Additionally, disability policies vary based on their definition of total or partial disability and depending on the insured person’s ability to perform the duties required in their own occupation or any occupation.
Many employers offer group disability insurance coverage for their employees. Employees should know what coverage they have, how to apply for it, and what is required to apply. Self-employed individuals and those not covered by an employer need to ensure they have adequate coverage to cover living expenses while unable to work. There are resources available through federal and provincial benefit plans and various advocacy groups and philanthropic organizations that provide education and support for the disabled. For example, in Ontario, many employees are covered by the Workplace Safety and Insurance Board (WSIB). Contract workers and some part-time employees may not be covered.
Disability can happen to anyone at any time. Unless the benefit is in place prior to injury, it is too late to apply once you can no longer work. Now is the time to think about what you would do if you were temporarily or permanently disabled. Would you have adequate savings and resources to meet your living expenses for six months…let alone several years?
Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.
This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.
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