A Guide to Critical Illness helps to fill in the blanks with answers to questions Canadians commonly ask about the product
A brand-new guide aimed at helping Canadian consumers better understand the benefits of critical illness insurance, how it works, and the financial security that it offers has been revealed by The Canadian Life and Health Insurance Association (CLHIA).
Sheila Burns, director of health and disability policy, who also led the team that created the guide, called A Guide to Critical Illness, said it was created collaboratively among all their member insurance companies.
“One of the reasons we created the guide is we were hearing that this is a product that wasn't well understood by consumers, and sometimes by agents as well,” Burns said. “There were certain aspects of it [that was understood], but they didn't have a great understanding of it.”
Burns noted that working collaboratively to create a guide which highlights what critical illness is and isn't, helps differentiate it between other living benefits and life and health insurance products.
“It’s also to give a little bit of information about what they'd be looking for in a critical illness insurance policy,” Burns said.
Critical illness insurance was first sold in Canada 30 years ago and is less well known than other kinds of insurance. As with most things that aren’t always understood, there are also misconceptions and myths that surround critical illness, to which Burns, and her team, wanted to respond to.
“In the insurance business, we sometimes hear some confusion between a disability product and a critical illness product,” Burns noted. “We pointed out that for critical illness, you don't have to be unable to work, that the eligibility for the benefit is based on a diagnosis. That's one of the reasons we have those benchmark definitions for the industry, as well, to help people understand what we mean by “diagnosis”.
Another myth that surrounds the topic, Burns added, is that the product is expensive, or somewhat out of reach.
“This guide really helps to explain some of the different options and riders that are available and to help people start a conversation with their insurance advisor to have a better understanding of what they might want in a policy and the advisor can help them understand how that would impact the cost,” she said.
Burns also points out that it can be available as part of a group benefits package, which she says is “a great way to make the product affordable and get it out there to a lot of people because it is a really beneficial product. If people just haven't looked into it on their own, or don't think it fits into their budget at their time, then an employer offering it to them can be a great way to protect them.”
In addition, one thing the CLHIA sees a lot of that can be added onto the group benefit, is to include coverage, even optional, for spouses and children, including life and health insurance.
Burns says they often see employees who need to take time off work to look after a child or a spouse who's sick. Sometimes that also involves traveling to a different city while they're getting treatment. Meanwhile, their own disability insurance doesn't cover the time off because it's not the employee who is sick.
“Having a critical illness insurance policy on those people can provide a little bit of income, or a lump sum of money to help with that acute timeframe when someone is going through that treatment phase,” Burns added.
Critical illness differs from life insurance, Burns explains, as it's paid out while someone's alive, whereas life insurance pays out upon a death. Usually, the payment would go to the insured person and while there are some provinces where it allows people to name a beneficiary on a living benefit, the critical illness payment first goes to the insured person. “It pays out as a lump sum of money in a non-taxable benefit, which is really great,” Burns said.
Key takeaways to know about critical illness, Burns highlights, is an employee could get a large sum of money that’s non-taxable and only pays out solely based on a diagnosis. “It's not contingent on somebody being unable to do their job, it's just based on the diagnosis and that's very different from a disability benefit.”
At the end of the day, the money can be used for anything, says Burns, from medical expenses that aren't covered under provincial health care, or private health insurance, home renovations, vehicle modifications, college funds or even a trip.
“There are no limits to what people can use this money for. Everybody has different needs and might have it earmarked for different things if they ever needed it,” she says.
The CLHIA is a voluntary association whose member companies account for 99 percent of Canada's life and health insurance business. These insurers provide financial security products including life insurance, annuities (including RRSPs, RRIFs and pensions) and supplementary health insurance to over 29 million Canadians.
They hold over $1 trillion in assets in Canada and employ more than 170,000 Canadians.
