Critical Illness

Twenty years ago, a doctor in Cape Town, South Africa, was seeing another desperate situation. A patient, who had just had a heart attack, was looking down a black hole of despair (the most common cause of the second heart attack is stress, usually financial). The doctor had a friend in the insurance business and said to him,
"What good is a big life insurance policy? What my patients need is money now, when they are sick, not when they are dead."
The idea of critical illness insurance was born. This policy provides a lump sum payment on diagnosis of certain covered medical conditions. Perhaps it should be called "serious illness insurance." This cash can pay for treatment or living expenses. It can lift the financial stress a person feels, so that they can concentrate on getting well.
The newspapers regularly tell the story of people who have to wait for treatment because of an overloaded medical system. Is it getting any better? No. Will it get better? No. Demographics are against the public health care system; there are too many aging users. But if you needed a heart bypass operation and wanted to bypass the waiting list, a critical illness insurance plan could provide the funds to do this.
What do the majority of Critical Illness Insurance plans cover?
Some basic policies cover as few as 4 things (usually offered as part of a mortgage insurance plan).
"The true cost of insurance is not the premium... but the claim that does not get paid."
Individual policies are more comprehensive.
  • Cancer (other than skin cancer, which is not considered life-threatening)
  • Heart Attack
  • Stroke
  • Multiple Sclerosis
  • Coronary Bypass Surgery
  • Kidney Failure
  • ALS (Lou Gehrig’s Disease)
  • Loss of Speech, hearing, or vision
  • Coma
  • Paralysis
  • Major organ transplant
  • Severe burns
Where over 90% of life insurance applications are approved and issued on a “Standard” basis, Critical Illness (CI) has a different issue rate:
  • 55% - are “Standard” and put in force
  • 12% - are issued other than “Standard” (Rated or a coverage is excluded)
  • 14% - are declined by underwriters
  • 19% - are not proceeded with for any number of reasons (did not accept offer from company, or on reflection did not want to pay for it)
So, of all the applications submitted, only 2/3 of them result in a policy being put into force!
 

Can you qualify?

Underwriting CI has more complexity than life insurance. The risk of claim is higher and different. So, family history is reviewed more closely. Some “red flags” that garner attention are:
  • Family history of stroke/heart disease
  • Obesity
  • Hypertension
  • Elevated cholesterol/Triglycerides
  • Diabetes
  • Smoking
Companies publish a list of pre-qualifying questions. Here is a typical list:
  • Hepatitis (other than Hepatitis A), Cystic Fibrosis, Pulmonary Fibrosis, Emphysema (other than mild or early stage) or Multiple Sclerosis (MS)? Y/N
  • AIDS, a positive HIV test or AIDS related diseases, Hemophilia, Sickle Cell Disease? Y/N
  • Any Heart Condition or Heart trouble including but not limited to congenital disorders, Angina, Coronary Bypass, Heart Attack, Angioplasty, Valvular surgery, Transient ischemic Attack (TIA)? Y/N
  • Drug use (other than social marijuana use within 3 years) or Alcohol Abuse within the past 2 years or Suicide attempt within past 2 years? Y/N
  • Diabetes: Insulin-dependent diabetes mellitus (IDDM) or Non-insulin dependent diabetes (NIDDM) under age 40, or diagnosed within the past 6 months? Y/N
  • Cancer* or Major Organ Transplantation? Y/N
  • Alzheimer’s or Down’s Syndrome Y/N
  • Amyotrophic Lateral Sclerosis (ALS or Lou Gehrig’s Disease), Cerebral Palsy, Muscular Dystrophy, Huntington’s Chorea, Parkinson’s Disease, Paralysis (other than Bell’s Palsy), Lupus (other than Discoid Lupus Erythematosus), Stroke or Uncontrolled Epilepsy (frequent attacks)? Y/N
  • Kidney failure or polycystic kidney disease? Y/N
*Person to be insured with certain cancers, including skin cancers other than melanoma or certain early stage cancers, may be eligible for coverage. You may complete the Application and submit for underwriting.
 

IF YOU ANSWERED “YES” TO ANY OF THE ABOVE QUESTIONS,

YOU ARE NOT ELIGIBLE FOR CRITICAL ILLNESS INSURANCE.

DO NOT COMPLETE AN APPLICATION.
 

What causes claims for Critical Illness?

  • Cancer 55%
  • Heart Attack 18%
  • Stroke 8%
  • MS 6%
  • Coronary Artery Surgery 4%
  • All others 9%

“Every day in Canada, 200 people have a heart attack, 340 people are diagnosed with cancer, and 137 suffer a stroke” -Dr. Marius Barnard, originator of Critical Illness Insurance.

You can be sure all of those people would have owned a policy if they knew they would be on the claim list . Unfortunately we can not predict with any certainty our future health or well being. The sister of a close friend when I talked about this type of protection [and who was fighting cancer] looked at me point blank and exclaimed

“ Why did no one come to me and offer this type of plan 5 years ago ? Before I got sick.. .You have no idea once you've been through one round of Chemo and decide to find alternative treatment how expensive it can be to find your own answers .. Ontario medical only pays when you are in the hospital.. “

I could give her no good answer and felt awful that no agent had made a presentation to her ..The insurance industry had had let her down.by never giving her the chance to say yes or no. Sue had been living in Ontario .. and we had just met

So it was not possible for me to have sold her the plan she now so certainly could have used .. But today after reading this if You realize it is a important bit of “ Peace of Mind” contact us and see if you might qualify.
 

Some recent contracts applied for :

Heather M . works as Co-ordinator / Manager for a large Charity . At age 41 I suggested it was time to add this to her Financial Portfolio. She applied for a

$100,000 policy with RBC Insurance . Level cost to age 75 with the provision of a return of all deposits at that time if no claim is paid. Due to family history there was a rating

of 25% extra . Her cost $139 monthly .. She said at time of policy delivery .” I guess the

underwriters are sending a message about the history of heart disease in my mothers side of the family .. I have to have this and now is the time to do it ! “

Bob F. and Greg B. own a food marketing and sales business .. one partner is 55 the other 46 .As part of the corporate key man insurance needs each applied for and was issued a $100,000 10 year term plan. If either one has a serious health problem . The company will have $ to fend off the bank [ who will probably then restrict the line of credit] and be able to continue to pay the absent partners salary for a time.. Insurance Co. RBC, total premium [$1650 + $930 = $2580 ]
 
 

 

My First Critical Illness Claim

A family moved into Burnaby: a new country, new challenges, children to look after, and plans to make. I was referred by another client and they invited me for a visit. With some people you feel welcome in their presence. Nasim was such a person. I suggested she purchase a policy that would protect her against serious illness. She agreed that it was something to start at $36 a month and we would add to it later. The policy was issued by AIG Life in June of 1996. Nasim was a hairdresser and a good one. Several times I went after work to her house for a haircut. She was warm and liked to talk about the achievements of her two teenage daughters and the challenges of getting ahead in this new country.

In July of 1997 I called her to touch base. It had been 6 months since our last contact. She was so glad I had called. Since my last visit, there was bad news: Lung Cancer in a 46 year old woman who had never smoked!

She had wanted to call, but there had been so many things on her mind, and chemotherapy had knocked her hard. I quickly arranged the paperwork to get her cheque. She wanted me to take her to have her will drawn up “as soon as I feel a bit better”. That chance never came. She died in early August.

Nasim’s husband and 2 daughters moved away and I lost touch. Another family torn apart by cancer. A woman who did not get to see her children grow up…

I learned the lesson (again): that we don’t always have the luxury of time. We were going to add more insurance “next year”. That chance did not come. A cheque for $30,000 was paid by AIG. It covered some bills, paid the last expenses and allowed her husband to pick up a few pieces. There should have been more. At least there was something.

“The frequency or probability of loss is irrelevant. It must be measured with the magnitude of the outcome”
 
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