Severe health insurance is a relatively new type of policy that is often misunderstood. Today we will clarify what it is and what it is about.
How does serious illness insurance work?
Critical illness is similar to life insurance, except when it is paid when you are diagnosed with an illness covered by the policy, rather than being paid at the time of death. However, some people confuse this type of insurance with disability insurance, which replaces income in the event of a disability.
Health insurance, like life insurance, is paid in a single payment if you are diagnosed with a predefined disease such as cancer. You decide how to spend this amount – some people put it into additional medical care (especially if there are some treatment methods that are not covered by provincial health care), others decide to take time off from work to spend with the family or to travel.
As with many insurance products, this type of insurance plan includes an insurance quote, an underwriting, and an underwriting process that the insurer analyzes before being able to obtain a policy; and as with any insurance policy, a critical illness policy comes with pros and cons.
Let’s take a closer look at the pros and cons of this type of insurance.
Pros of serious illness insurance
There are many positives:
- Funds that can help where needed: The lump sum you receive if you are diagnosed with a critical illness will allow you to get better treatment and hopefully in some cases complete recovery. You can also spend these funds on other needs or projects (such as traveling or removing items from your wish list).
- Protection for your business: If you have your own business, you may need to work part-time, after receiving a diagnosis of critical illness (reduced hours of work are required when extensive medical treatment is required). Close the financial gap created by your short hours at your company. With the funds, you could hire someone to help you with your business.
- Stacking protection: Unlike disability insurance, coverage for serious illnesses is “stackable”. With disability insurance, coverage is limited because it is based on income and it is not possible to exceed this limit even if you have several disability policies. You can, however, have different policies with different levels of coverage for different diseases. For example, if you have two policies with benefits of $ 250,000 and $ 300,000, you can get a payment of $ 550,000 when you make a claim.
Cons of critical illness insurance
- Expensive: This type of insurance policy is not cheap. For example, a Term 10 insurance policy with coverage of $ 500,000 (Term 10 indicates a policy that covers you for 10 years) for a 35-year-old non-smoking man with no pre-conditions costs around $ 180 per month (exemplary quote) while a policy Term 10 life insurance with coverage of $ 1,000,000 for the same person costs around $ 50.
- Definitions count: If a diagnosed disease, such as a heart attack, is not aligned with the definition of this disease in the policy, the claim may not be paid.
- It doesn’t cover you immediately: Normally the policy has a waiting period (e.g. 90 days) during which it is not covered.
- Payment is not immediate: If you are diagnosed with a critical illness, there is a “survival period” – (eg 30 days). If you die within that time, your request will not be paid.
Severe illness insurance provides solid coverage for the unexpected diagnosis of a serious illness, but this coverage comes at a cost. It is a good idea to partner with an insurance broker to get a quote for critical illness insurance and apply for a policy. Brokers have access to multiple insurance companies and will help you navigate through the complex application process, especially if you have pre-medical conditions.