Critical Illness Insurance
We understand that critical illnesses can disrupt your ability to support your family. Our critical illness insurance plans ensure that your income is replaced, allowing you to focus on recovery without the added worry of financial strain. We believe in giving you the freedom to return to work when you feel ready, rather than solely due to the need for income.
Critical Illness Insurance
CRITICAL ILLNESS INSURANCE
Critical illness insurance provides essential financial protection in the face of serious health conditions. It serves as a vital safety net, protecting you and your loved ones from a critical illness’s potentially devastating financial consequences. This coverage is necessary because these illnesses can result in significant medical expenses, loss of income due to inability to work, and the need for specialized treatments and care. Critical illness insurance typically covers a range of life-threatening conditions such as cancer, heart attacks, strokes, organ transplants, and major surgeries. With this coverage in place, you can have peace of mind knowing that you are prepared to face the financial challenges associated with a critical illness, allowing you to focus on your recovery and the well-being of your family.
Buy-sell critical illness insurance is a specialized form of insurance designed to protect business owners if one of the partners or shareholders is diagnosed with a critical illness. This type of insurance is essential for businesses because it ensures continuity and financial stability during a challenging time. For example, suppose a critical illness strikes one of the key individuals. In that case, the policy provides a lump sum payment to the affected person, which can be used to cover medical expenses, personal financial obligations, or business-related costs. Additionally, buy-sell critical illness insurance helps facilitate a smooth ownership transition by allowing the remaining partners or shareholders to purchase the affected individual’s shares or interest in the business. By implementing this type of insurance, companies can mitigate the financial risks associated with a critical illness, safeguard the company’s future, and provide peace of mind for all parties involved.
A key person critical illness insurance is a specialized type of insurance that provides financial protection to businesses if a key employee becomes critically ill. This insurance is crucial because key personnel often play vital roles in the success and stability of a company. Suppose a key person is diagnosed with a critical illness. In that case, this insurance policy provides a lump sum payment to the business, which can cover various expenses such as finding and training a replacement, meeting financial obligations, maintaining operations, or protecting any potential loss of income. By having key person critical illness insurance in place, businesses can mitigate the financial risks associated with the absence or incapacity of a crucial team member and ensure the continuity of their operations. This insurance offers peace of mind, allowing businesses to focus on their growth and resilience even during challenging times.
SPLIT DOLLAR CRITICAL ILLNESS
Split-dollar critical illness insurance with a return of premium feature is a unique and advantageous arrangement for both employers and employees. In this setup, the business and shareholder share the cost and ownership of the insurance policy, with the added benefit that a portion or all the premiums paid by the shareholder are returned at the end of the policy term if no critical illness occurs. This feature offers a significant advantage to the employee, as they have the potential to receive a refund of their premiums if they remain healthy throughout the policy duration. The business benefits from this arrangement by providing a comprehensive critical illness insurance plan while demonstrating its commitment to its shareholder’s financial security and wellness. The return of premium feature adds an extra layer of value and financial flexibility to the split-dollar critical illness insurance arrangement, making it an appealing option for both business and shareholders.
Why Critical Illness?
Bear in mind that Critical Illness insurance is very valuable coverage for the following reasons:
1. Disability Income insurance makes up the majority of your income, but only pays out to you as long as your doctor confirms you are unable to perform the important duties of your occupation. Once your doctor says you may return to work, even if you’d prefer to take more time off work, your disability benefit stops. Critical Illness insurance does not rely on whether your doctor says you can work or not. It depends on you satisfying the definition of the covered condition and surviving the 30 days after diagnosis in order to receive your benefit. The benefit for CI is much larger than Disability and it is a one time lump sum payment.
2. Your Disability plan has a 90 day waiting period. If God forbid, you go on chemo for 4 mos and then are told you may return to work, as the chemo worked, which is good news (actual story that happened to one of my health professionals who had Disability insurance with a 90 day wait, but no CI), then you would only receive one month’s benefit of your Disability insurance for having been off work 4 mos. With Critical Illness insurance, which was invented by a doctor, you receive your full benefit tax-free (if personally owned), 30 days after diagnosis of one of the 26 covered conditions, with 70% of claims being paid out for life threatening cancer (stages 2-4). For a non life threatening diagnosis of cancer (stage 1), you would receive the 15% payout, which doesn’t deplete your full benefit ($500K) if later on you are diagnosed with one of the 26 life threatening conditions. You also receive all your money back if no claim is made for one of the 26 life threatening conditions, even if they paid out multiple 15% early detection benefits for stage 1 cancer. This money back option is exclusive to Canadian policies.
3. Critical Illness insurance can be used for a spouse to take time off work to care for you, if you are sick. Their Disability coverage would not pay out to them if their spouse is sick. Critical Illness insurance can be used for anything you wish to use it for.
4. Critical Illness insurance helps solve the problem of choice. We have a healthcare system in Canada that most of us are very grateful for. The part that is disturbing are the long wait times for treatment, which have been exacerbated due to the pandemic. If you are diagnosed with something and do not own any Critical Illness insurance, you may be at the mercy of our system, and may have to wait months on end for treatment, even if your life depends on receiving treatment asap. Or, there may be a new drug that has not been approved by our healthcare system yet, that you would need to pay out of pocket for. With Critical Illness insurance, you can use it to join the two week treatment line up instead of our 9 mos line in Canada. You can choose to go get treatment at the Mayo Clinic in the states, if you wish, as you’ll have the money to pay for the treatment there. If you don’t have Critical Illness insurance, you may need to dip into your RRSPs, which when withdrawn, would be taxable, meaning you would need to draw out much more than you need, to account for the after tax amount needed. You won’t be able to re deposit these funds into your RRSP. And having a Critical Illness doesn’t necessarily mean your life is going to be cut short, so you still need retirement savings, especially these days with Canadians living longer than they ever have and Canadians recovering from their illnesses due to modern medicine and advancements that are keeping us alive and allowing us to survive our illnesses. My grandmother passed away at age 51 in 1981 from breast cancer. She was a healthy RN, working in Calgary and had retirement plans with my grandpa that were never able to happen. My family believes she would have survived her illness if diagnosed today, given the advancements. Since survival is much more likely, you’ll want a safety net to offer you choice without having to compromise your other financial commitments (retirement savings, etc).
5. Say God forbid, you suffer from a Critical Illness at age 62 and you were planning to work to age 64. Say your doctor says you may return to work 6 mos after you were diagnosed. Maybe you take your Critical Illness payout and use it to retire early instead of returning to work. Maybe the stress from work lead to the diagnosed event (this is an actual claim story from one of our physician clients who chose not to have CI- he wasn’t ready to return to work 4 mos after having an aortic dissection at 58 years old. But he had to, since he needed the money. His disability had only paid him one month’s benefit, given the 90 day waiting period).
6. Critical Illness replaces the need to rely on charity from friends, family and strangers. I have seen more than one GoFundMe for a physician and it shocks me. I always wonder why they didn’t have Critical Illness insurance and the reason is most often because they didn’t think it would happen to them. It happens to all professions, including physicians. You have a large income you need to protect, so that you don’t have to deal with the financial stresses on top of the emotional and physical stresses you’re already dealing with, which is why Critical Illness insurance makes sense. And if you don’t ever make a claim, you can get all your money back, so the only risk is in not having it.
I hope this clarifies the reasons for why Critical Illness insurance is valuable coverage. Not all of my clients have this coverage, since not all of them qualify medically. If you qualify and are able to get it, that is the most difficult part. It’s a gift to have it and it becomes more valuable as you age. The premium you pay for this plan is the solution to the problem rather than the problem itself. I used to look at my insurance premiums as the problem. But now I am grateful to pay the premiums I owe, as it provides peace of mind that I am guaranteeing my independence, same or similar lifestyle and dignity, should something serious happen to my health. The guarantee to get all your money back if you don’t get sick is a wonderful bonus as well, and it’s exclusive to Canada.
Also, if you do choose to incorporate again, then you can switch a portion of the ownership of your Critical Illness policy to your Corp and have your Corp pay the premiums. You personally would pay for the money back option, so that if you don’t make a claim, you may receive the premiums back, tax-free, including what your Corp paid all those years. This could change in future, if the CRA imprelents a section in the income tax act regarding Critical Illness insurance, but it is not likely, as not everyone qualifies for this plan, and of those who qualify, not every business owner has this plan, so it’s not likely to be enough of a red flag for the CRA to want to tax it. This is something we would discuss with your accountant before switching ownership, to ensure you are aware of the implications and potential tax changes (CRA has that control of course). Many of my business owner clients do own their CI policies as split dollar or “shared ownership plans”, which means payment is split between them personally and their corp.