Corp-owned Critical Illness Insurance (“CII”)

Corporate-Owned Critical Illness Insurance (CII) in Richmond, Metro Vancouver

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Corp-owned Critical Illness Insurance (“CII”)

At Royal Rock Wealth , we help clients in Metro Vancouver assess their need for critical illness insurance as part of their financial strategy. Many people think they are fully protected with standard health insurance, but the fact is most do not cover life, business expenses, in addition, some treatment costs for critical illnesses can be much higher than what these plans cover.

 

Critical illness insurance provides a financial safety net, offering a lump sum payment upon diagnosis. This insurance can help cover medical expenses not included in your health plan, replace lost income during recovery, or meet other financial obligations, allowing you to focus on your health.

Our dedicated team is here to help you evaluate your insurance needs and create a comprehensive plan that protects you and your loved ones. If you want to learn more about how critical illness insurance can fit into your financial strategy, contact us today to schedule a consultation. We proudly serve clients in Richmond and across Metro Vancouver.

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What is Critical Illness Insurance (CII) ?

CII is an insurance product in which the insurer contracts to make a lump sum if the insured becomes ill with a critical or severe illness that may involve extended hospitalization and extensive treatment.

 Critical illness insurance provides extra coverage for serious medical events, including:

  • Aortic surgery
  • Aplasic anemia
  • Bacterial meningitis
  • Benign brain tumour
  • Blindness
  • Cancers
  • Coma
  • Coronary artery bypass surgery
  • Deafness
  • Dementia, including
  • Alzheimer’s disease
  • Heart attack
  • Heart valve replacement or repair
  • Kidney failure
  • Loss of independent existence (LOIE)
  • Loss of limbs
  • Loss of speech
  • Major organ transplant
  • Major organ failure on waiting list
  • Motor neuron disease
  • Multiple sclerosis
  • Occupational HIV infection
  • Paralysis
  • Parkinson’s disease and specified atypical parkinsonian disorders
  • Severe burns
  • Stroke
  • Acquired brain injury 

Inability to handle daily business operations can significantly disrupt business interests. Critical Illness Insurance (CII) policies offer cash payouts to help cover additional expenses that may exceed the limits of MSP and group insurance reimbursements. For many, CII policies serve as an effective income replacement.

Understanding Critical Illness Insurance (CII) Payouts for Business Owners

For business owners, it’s essential to know how life insurance payouts are taxed, depending on who pays the premiums:

  • Company-Paid Premiums: When the company pays the premiums, the payout is directed to the corporation. Should the business owner withdraw this amount for personal use, it will be subject to personal taxes.
  • Personally-Paid Premiums: When the individual pays the premiums, the payout is received directly by them and is entirely tax-free.

Having clarity on this can optimize tax benefits and ensure the payout meets personal and business needs effectively.

The Benefits of Critical Illness Insurance Payouts

The lump sum payment from critical illness insurance provides flexibility, allowing individuals to use it according to their specific needs during a difficult time. 

 

  • Medical expenses: Medical expenses like surgeries and cancer treatments not covered by MSP can be covered by critical illness insurance. This coverage enables individuals to access necessary treatments.
  • Living expenses:Thelump sum payment can also be used to cover living expenses, enabling individuals to concentrate on their recovery without the stress of financial concerns. Some may opt to use the money to pay off their mortgage, alleviating future financial burdens for their families.
  • Final wishes: The lump sum payment can be used to fulfill final wishes. This financial support allows individuals to focus on meaningful experiences during tough times, such as taking a dream trip, visiting loved ones, or making donations to causes they care about.
  • Financial resource : For business owners, a critical illness insurance payout can be used for financial resource during tough times. The lump sum can be used to hire temporary staff to fill in for the owner, ensuring the business keeps running smoothly. It can also help cover ongoing expenses like office rent, preventing disruptions that might impact productivity

If you would like to learn more, book an appointment with our insurance advisor in Richmond.

How does Critical Illness Insurance policy pricing work?

  • Health Status: Your current health condition plays a key role in determining premium rates. Insurers will consider any existing health conditions you may have, as well as your overall physical condition when setting your premiums.
  • Smoking: Smokers typically face higher premiums than non-smokers due to the increased health risks associated with smoking. This is because smoking is linked to various serious health conditions, which makes coverage more expensive.
  • Medical History: Your personal medical history, including any past illnesses, surgeries, or chronic conditions, is an important factor in determining your premium. A history of serious health issues may result in higher premiums or affect your eligibility for coverage.
  • Family Medical History: Insurers will also consider your family’s medical history, particularly conditions in close relatives (parents, siblings). If there is a history of hereditary diseases or serious health conditions, it may lead to higher premiums or challenges in qualifying for coverage, especially if you’re under 50.



Additional Strategies - Return of Premiums

The Return of Premium (ROP) option lets you add a feature to critical illness and disability insurance. This feature allows you to get back some or all of the premiums you have paid, if certain conditions are met.

  • Return of Premium on Death (“ROPD”): If the the insured dies during the policy term and hasn’t made any claims, all the paid premiums will be returned to the beneficiary chosen by the insured.
  • Return of Premium on Cancellation/Surrender (“ROPC/S”): If the insured decides to cancel or surrender the insurance policy before it expires, they can get back some or all of the premiums they have paid, depending on the policy’s terms.
  • Return of Premium on Expiry (“ROPE”): If the term of the policy expires and no claim has been made, the insurance provider will refund all premiums paid to the insured life or his/her designated beneficiary.

These options may come with higher premiums or specific conditions, so it’s important to consult with an insurance adviser. For more details, contact Royal Rock Wealth in Richmond. 

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Additional Strategies - Split Dollar Critical Insurances: A Collaborative Funding Approach for Businesses

Split Dollar Critical Illness Insurance is a funding arrangement commonly used in business partnerships or key person insurance. In this structure, the costs and benefits of a critical illness policy are shared between two parties, usually an employer and an employee or a business partner.

Key Features:

  1. Cost Sharing: Both parties agree to share the premiums for the critical illness policy, which can make coverage more affordable for the individual.
  2. Policy Ownership: Typically, one party (often the employer) owns the policy, while both parties have an interest in the benefits.
  3. Benefit Distribution: In the event of a critical illness claim, the benefits are paid out according to pre-agreed terms, providing financial support to the insured party while also protecting the interests of the other party involved.
  4. Tax Advantages: This arrangement can offer potential tax benefits, as the costs and benefits can be structured to minimize tax liabilities.

Split Dollar Critical Illness Insurance is a strategic way to ensure key individuals in a business are protected while sharing the financial responsibilities.

 

Call or email one of our insurance professionals now to discuss the policy overage you need!

Contact Royal Rock Wealth for Critical Illness Insurance (CII)

At Royal Rock Wealth, we specialize in a wide range of insurance solutions, including Critical Illness Insurance (CII), serving Richmond and the Metro Vancouver area. Our experienced insurance advisers are dedicated to finding the most suitable coverage tailored to your unique situation and needs. Contact us today for a consultation and let us help you secure your future.