Although many people believe that they’re fully protected with a standard health insurance plan, in many critical illness cases, the costs of treating such illnesses often end up being far greater than the amounts a traditional medical plan will cover.
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. It is possible to purchase standalone critical illness cover without having life insurance, but most people link them together.
These policies work based on providing additional coverage for critical medical events or occurrences such as:
Typically, such emergencies or illnesses mean that affected clients incur higher than average medical costs, which may have a significant impact on the insured’s finances. The inability to attend to the daily business may be highly disruptive to one’s business interests. Therefore, CII policies pay out cash to help cover any additional expenses that traditional health insurance policies may not cover or only provide reimbursement up to a certain amount. For many, CII policies can act as an income replacement.
If a person is diagnosed with a predefined critical illness during the policy term and provided premiums have been maintained, CII will pay out a lump sum.
Such monies may be used for:
The premiums paid depend upon several factors, including the amount and extent of coverage required, the gender, age and health of the insured, and family or the insured’s medical history.
The Return of Premium (“ROP”) option involves adding a rider to critical illness and disability insurance policies allowing the policyholder to recover all or a part of the premiums which have been paid provided certain conditions are met.
The three main types are below:
Insurance solutions are regularly evolving and new types of insurance such as Shared Ownership (“SO”) or Split Dollar Critical Illness (“SDCI”) are becoming more common. Shared Ownership is mostly seen in insurance policies where the corporation is the beneficiary of an insurance benefit and an employee owns the policy cash value.
However, even though the SDCI policy does not offer a residual cash value, a Return of Premium (“ROP”) option is available in the following instances:
To effect CI, a Shared Ownership Agreement, could be structured in the following way:
More and more Canadians are being affected by critical diseases. Accordingly, critical illness insurance coverage is becoming an essential for many, offering a financial security blanket for many to help deal with skyrocketing hospital bills and medication costs.
You only have to look at some statistics to understand why CI policies are a preferred insurance solution:
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