Most people understand why they should purchase Life and Disability Insurance but there is a third type of personal insurance most people should consider but don’t. With all of the incredible advances made in medical science in recent years more and more people are surviving Heart Attacks, Cancer and other debilitating diseases with only temporary effects on their quality of life. The speed of recovery may not be enough to trigger a Disability claim and if you survive you certainly won’t be making a claim on your Life Insurance but the financial concerns are still significant and without proper insurance coverage could set you back severally months or even years on your retirement plan.
Enter Critical Illness Insurance or CI in industry jargon.
This insurance is designed to pay out a lump sum to cover to costs associated with treatment, recovery and lifestyle adjustments associated with the diagnosis of a critical illness that most people are expected to return from. Heart Attacks, Strokes and Cancer are the big three but CI can also be used in the event of other long term illnesses like Multiple Sclerosis, Parkinson’s or Alzheimer’s Disease to name just a few.
So here are 5 questions to ask yourself about your exposure to the risk of a critical illness and how you would deal with it should one occur in your life.
1 – Are you under more or less stress that you were 5 years ago?
Stress is one of the leading causes of Heart Attack or Stroke. If you are feeling stressed, under treatment for anxiety or just plain more worn out than you used to be you could be at increased risk for any number of Critical Illnesses.
2 – If I need to focus on the recovery from a critical illness, would I be making more or less money than I do today?
This is kind of a no brainer. If you aren’t going to work, you won’t be making as much money. A CI policy can help bridge that gap.
3 – Would my spouse also have to take some time off of work to assist in my recovery?
Even after you satisfy the waiting period on a Disability Claim and start to receive some income there, no disability policy will provide replacement income for your spouse who is not technically disabled. This is a common misconception surrounding group health plans. Many small business owners don’t think they need their own health plan if their spouse works for a large organization that offers extended benefits to family members. While it may be true that the prescription drugs will be covered by that plan, there will be no income replacement benefits extended anyone other than the employee and then only when it is the employee who is sick. Bottom line, if your spouse takes time off work to help you, they won’t be making any income either.
4 – Do I currently have sufficient financial resources to set aside to supplement the financial loss of focusing on recovery and not on work?
Even if you answer yes to this question why would you? A CI policy is designed to provide you with all the necessary resources you need at a fraction of the cost. It’s important to note the time value of money. $5000 taken out of retirement funds at 45 years of age, represents up to $25,000 if left in a good growth investment for 20 years.
5 – Would my bank lend me more or less money, if I were not able to work due to an illness or disability?
As benevolent and sympathetic as your banker may be, banks always underwrite loan requests based on your current income. If you are off work due to an illness or injury it will be more difficult for you to obtain a line of credit or any other type of loan in order to maintain your lifestyle.
As is with all personal insurance, once you are diagnosed with a Critical Illness it’s already too late. If you or anyone in your family has a history of Critical Illness, or if you are in a high stress occupation CI is a valuable part of the risk management puzzle you can’t afford to ignore.
For more information on Critical Illness Insurance and how it fits into the 6 Steps to Financial Freedom write to: firstname.lastname@example.org or get a copy of the booklet, “6 Steps to Financial Freedom” from the Products page. I talk more about Critical Illness Insurance and the roll it can play in a comprehensive financial plan as part of step two – “Regulate Risk”.