Why Critical Illness Insurance may Disappear

Big changes are happening to critical illness insurance, so if you have been thinking of getting a policy, now is the time.

As of right now, you can get critical illness insurance, which will refund all of your premiums paid in the 20th year if you don’t get sick and make a claim during those 20 years. For example, a 35 year old female could get $100,000 of critical illness insurance that would cover her until age 75 with a return of premium rider for $131.94 per month. This policy acts much like a savings plan, if the woman gets diagnosed with a critical illness at any point before age 75, she would benefit from a $100,000 lump sum tax-free benefit that she could use to take time off of work, get special treatment out of country, allow her spouse to take time from work, etc. If she doesn’t get sick, she can take back every penny she paid into the policy, starting in year 20. In year 20 she would have paid $31,665.60. She can either keep the policy in force, or take the money and use it for retirement or an investment etc.

This ‘return of premium’ feature of critical illness policies will soon be phased out. The insurance companies are saying this will probably be occurring by Fall 2017. The premiums for these polices will also be increasing. Why is this so? Critical illness insurance has only been around for about 15 years, and insurance companies are just now seeing the results of historical data on claims being made. With the ever increasing rate of cancer (1 in 2.3 people being diagnosed), the claims that are being made on these policies are becoming too high for the product to continue at this price and with these features.

And this is just the start. There have been some breakthroughs in DNA testing recently that allow people to map their DNA to see if they are susceptible to heart-attacks, cancer and other hereditary diseases. And the Canadian Government is passing privacy legislation that will prevent the insurance companies from accessing this information. This will cause the people who are pre-disposed to disease, to rush out and get critical illness insurance, which will increase the amount of claims to the point where this insurance product is no longer sustainable. In order for insurance to work, more people have to be paying premiums than making claims, and soon the amount of claims will be so high that this will not be the case.

So if you were on the fence about getting a policy to protect your family or business, then now is the time. Call us today to discuss your family or business’s financial plan.

It is a fact that one in three Canadians will experience a life-altering illness during their lifetime. Who do you know someone who has suffered from a heart disease, stroke or cancer? Chances of survival are great, but will your finances survive?