Critical insurance

by · July 16, 2012

Critical Illness Insurance is the financial safety net should you suffer from a critical illness. Critical illness coverage provides benefits that are paid upon the diagnosis of a critical illness such as cancer, heart attack, stroke, Alzheimer’s disease and others. In other words, critical illness coverage provides a living benefit that pays-directly to the policyholder-when they have a critical illness. For example, if someone with $100,000 of critical illness coverage were suddenly stricken with malignant cancer, he or she would receive a $100,000 payment.

The attractiveness of this product is no surprise when one considers what it offers the potential buyer. A lump sum of non-taxable cash, while the insured is living, upon the diagnosis of a covered condition, thus alleviating the additional stress which financial pressure would bring. Particularly since the critical illness survivor would then be able to afford the medical treatment and other expenses not covered by his or her private or provincial medical plans. They could then afford to continue to pay the mortgage or other bills in the event they were without income for any length of time. Critical Illness coverage effectively addresses these and many other financial issues.

The concept of Critical Illness insurance was developed in 1983 by Dr. Marius Barnard, who with his brother, Christian Barnard, performed the first successful heart transplant. Dr. Barnard saw an overwhelming need for insurance that paid a “living benefit” policy. Barnard conceived the idea for Critical Illness insurance when he found his patients “didn’t lose their life, they lost their life savings” after surviving once fatal illnesses such as cancer, stroke or heart disease. Dr. Barnard says “before the age of 65, the chances of suffering a condition keeping someone off work for more than six months are 15 times higher than that of dying. With the increasing life expectancy in Canada, we have a greater chance of experiencing a serious illness and surviving longer.”

While fairly new to Canada, critical illness insurance is one of the most widely sold insurance products in South Africa, Japan, Australia, Ireland and the UK. Since its introduction in Canada in 1994, Critical Illness coverage has rapidly grown to a $200 million dollar market. This is evidence of the consumer need for critical illness insurance and the need for financial security in life as well as death. As Dr. Barnard says, “Critical Illness insurance gives you financial independence when you need it most. You need insurance not only because you are going to die but because you are going to live.”

Need for Critical Illness Insurance

Many Americans are diagnosed with critical illnesses each year. Thanks to continuing medical advances, most survive. But the cost of coping with and recovering from a critical illness is something many people have not planned for. Consider these facts: Survivors of strokes can have costs exceeding $140,000 over their lifetimes, and a heart bypass operation can cost more than $60,000.1 Now your employer is offering you the opportunity to purchase AIG@Work Critical Illness Insurance underwritten by members of the AIG Companies®. This affordable Critical Illness Insurance pays a lump-sum, cash benefit you can spend as you like to help ease the financial challenge of recovering from a critical illness and allows you and your family to pay for the services you need, when you need them.

Cash benefits are paid directly to you or your family (unless you direct otherwise) without deductibles or co-payments, in addition to any other coverages you may have. And you can use the money for treatment or to help meet ongoing financial demands. For example:

  • living expenses;
  • un-reimbursed medical expenses, such as alternative therapies, uncovered procedures, out-of-network providers, and deductibles and co-payments;
  • home health care;
  • travel to and from specialized treatment facilities;
  • child care and college tuition;
  • job retraining; and
  • home modifications.

General Exclusions and Limitations

  • A. Exclusions

The policy does not cover any loss caused in whole or in part by, or resulting in whole or in part from, the following:

  • a) The insured person’s suicide or any attempt at suicide, or intentionally self-inflicted injury or any attempt at intentionally self-inflicted injury;
  • b) Declared or undeclared war, or any act of declared or undeclared war;
  • c) The insured person being under the influence of drugs or intoxicants, unless taken under the direction of a physician;
  • d) The insured person’s commission of or attempt to commit a felony;
  • e) The insured person’s voluntary participation in any riot or civil insurrection; or
  • f) Any illness specifically excluded from the definition of any critical illness.
  • B. Pre-Existing Conditions

Benefits are not payable in connection with a pre-existing condition during the initial 12 consecutive months in which the insured person has been enrolled for coverage (including any waiting period for coverage eligibility). A critical illness resulting from a pre-existing condition commencing thereafter will be covered unless otherwise excluded by the policy. Pre-existing condition means any illness or injury for which an insured person received any diagnosis, medical advice or treatment; or had taken any prescription medicines during the 12 months immediately preceding the effective date of the insured person’s coverage under the policy.

Pre-existing conditions and limitations may vary on a state-by-state basis.