- Posted by Sanjeev Kamra
- On June 1, 2011
- 0 Comments
Thanks to advances in medical science and a growing trend toward fitness and health awareness, more and more people are surviving illnesses which would have proved fatal in the past. In 2000, the life expectancy for a 65-year-old male in Canada was another 16 years. By 2025, a man the same age is expected to live another 18 years. Similarly, a 65-year old female can expect to live another 20 years and, by 2025, 21 years.
This means a great many people are going to be retired longer than they actually worked and that many of them are going to get pretty sick during that period – all of which points to the growing need for products like critical illness coverage.
Unlike life insurance that supports your family after you’re gone, or disability insurance that replaces some or all of your income if you’re unable to work, CI insurance is designed to protect against the costs of expensive medical or custodial care resulting from a significant illness.
Canadians are at risk:
Studies conducted by Statistics Canada, the Canadian Cancer Society and the Heart and Stroke Foundation suggest that one in three Canadians will develop cancer during their lifetime and that one in four is likely to have a heart condition, a blood vessel disease or a stroke-related illness.
If this concerns you, the key to determining what you’ll likely need is to calculate the potential costs of future care, factoring in the length of time that it’s likely to be used, the amount of government support available – which varies sharply from province to province – and the money you’ll have on hand. Keep in mind that the more comprehensive the coverage, the more expensive it tends to be.
Like most insurance, premiums are determined by your gender, age, whether or not you smoke, and your personal health history. A family tendency toward a hereditary disease like cancer, for instance, could limit your coverage – which can’t be purchased for a pre-existing illness.
Once you qualify, you get a cheque (it’s paid out as a tax-free lump sum, generally 30 days after diagnosis) to pay for private or alternative medical treatment, reduce debts, renovate your home to accommodate a lifestyle change, cover the costs of child care while you’re on the mend, or to keep your business running.
Depending on the coverage you choose, critical illness insurance can cover cancer, heart attack, stroke, paralysis, diabetes, multiple sclerosis, Alzheimer’s, and many other ailments. Not all plans cover cancer, heart disease and stroke equally, so read the fine print carefully.
Although often seen as a personal coverage issue, critical illness policies can also, to varying degrees, be used in business settings. If you’re self-employed, or are an important cog in the wheel at work, CI coverage may make sense here too.
Key shareholder coverage:
Key person life insurance is frequently put in place because the death of a key employee or shareholder would result in a variety of financial difficulties for the business. But similar problems can arise if a key employee becomes critically ill, particularly if the illness prevents the employee from returning to work for an extended period, or perhaps permanently. Banks may require the collateral assignment of insurance on the life of a key shareholder to secure business loans. Losing a key employee could also impact the firm’s ability to manage business loans, restricting the purchasing shareholder’s earning power, thereby limiting his or her ability to repay the amounts owed.
Shareholder agreements typically provide for the purchase and sale of shares on a shareholder’s death or disability and this could also include critical illness. There’s some question whether critical illness is always an appropriate ‘triggering event’ in a shareholder agreement, so be sure to review this aspect.
For example, a shareholder might have a mild heart attack, or incur a treatable form of cancer, and still have a full recovery. In this instance, critical illness benefits might be paid without triggering a sale of shares since the individual may be able to continue working. On the other hand, there’ll be circumstances where the onset of a critical illness might trigger a desire to sell out and the coverage could provide significant financial help. For more info call 905-216-2445, click firstname.lastname@example.org or visit www.vnaccountingsolutions.com