Critical Illness Insurance Living Benefits Center
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The Market
Who is a good prospect for Critical Illness coverage?
Everyone!
The primary focus should be individuals (single or married)
in the 20-55 age range. These individuals may have one or more of the
following needs:
Mortage Protection - One of the largest financial commitments we undertake
during our lifetime is a mortgage to buy our homes. Therefore, making
the mortgage payments are our biggest financial threat in the event of
a serious illness. The proceeds of a Critical Illness plan, depending
on the amount purchased, can provide the necessary money to repay all
or a large part of a mortgage. This applies to single as well as married
prospects.
Family Protection "Breadwinner" - Households with a single earner may be relying on the idea that, in a crisis, the non-working partner could find work. In practice, this could be very difficult if the person is untrained or has not worked for some time. Even if a job is found, the income is likely to be less than the previous "breadwinner's". Restrictions are imposed on the "breadwinner's" Disability Income Insurance to provide that person with an incentive to return to work. It is unlikely that Disability Insurance will be adequate to sustain the accustomed standard of living due to the fact that a serious illness will result in "hidden costs", such as child care arrangements, housekeeping, home or car modifications, rehabilitation, etc.
Single Persons - The newest and untapped market is single persons without dependents who may or may not have a great need for life insurance. However, a single person who falls ill effectively becomes his or her own dependent, with no one to rely upon to assist in day to day tasks or to help provide income.
Homemakers - Full time homemakers may not bring money into the household, but the value of his/her unpaid work has been estimated at around $30,000 per year. Who would look after the children if the homemaker becomes disabled, or is diagnosed with a life-threatening illness? The partner may even have to take time off from work to tend to the family! How would the family survive financially? As unemployed homemakers are unable to obtain Disability Income Insurance, or at least an adequate amount, a serious flaw exists in a family's financial security. Critical Illness Insurance helps meet this need.
Self-Employed Persons - This group will suffer a double blow if a critical illness strikes. Not only would income decrease or cease altogether, but the business itself could be in danger.
Limits on Disability Income Insurance - Individuals earning high incomes are unable to insure their total income due to the maximums established by insurance companies. Therefore, if an illness occurred, it is very unlikely they would be able to maintain their quality of life. Critical Illness Insurance will provide the additional money necessary to maintain that quality of life.
Limited Health Insurance Coverage - Some individuals have health insurance benefits which may limit the types of procedures which are covered. Frequently, experimental procedures are not covered by insurance. Also, some HMO's limit where treatment can be received after diagnosis. Critical Illness provides people with options.
Keyperson Insurance - Keyperson Life Insurance only addresses the effect on the business if a key person dies. What would be the effect of a critical illness? When will the key person be able to return to work, if at all? Does the company find a short term replacement? Will the key person want to return to work?
Special Occupations - For some occupations, Disability Income Insurance is unavailable. This leaves the individual open to financial ruin in the event of sickness or accident. Now a coverage exists which will provide a lump sum benefit upon the diagnosis of a critical illness, thus providing these individuals with vital protection.
It should be noted that under no circumstances should Critical Illness Insurance be considered a replacement for Disability Income Insurance, but instead a complement. Because of the limits on coverage for DI Insurance, and the fact that DI pays a small amount over a long period of time, it is a natural complement to Critical Illness Insurance. Even for individuals or families with health insurance, a serious illness can bring financial disaster. As published in the Journal of the American Medical Association, nearly one-third of all families caring for seriously ill patients during a two year period lost most or all of their life savings.7
Many families find that they need to delay college education for their children, seek less expensive housing, or postpone or cancel many of their financial goals. Patients are living longer and more of their care is provided at home where insurance covers few expenses. Critical Illness Plans can provide individuals and families with the financial support they need by providing benefits to use as they see necessary.
What are some of the expenses or indirect costs that might be incurred due to a critical illness?
Rehabilitation
Home health care needs
Patient becomes partially or totally disabled and loses part or all of
his/her income
Time off work for care-givers
Co-insurance and deductibles
Home and car modifications
Medication
Experimental treatments
Self-employed individuals may find their business in danger
Investments (401K, pension, etc.) are liquidated; contributions cease
Housekeeping or child care expenses
Transportation and lodging for family members during treatment
Individuals have these same expenses and needs. Obviously this may be different than their need for life insurance. While income decreases because the patient and/or care-giver is off work, expenses increase for the care of the patient. This causes a "double" financial burden. Benefits received from the Critical Illness plan can be used for the above expenses as well as for everyday expenses such as household bills, mortgage, other loans, etc.
The need for Critical Illness Insurance has increased due to a higher incidence of diagnoses coupled with advances in medical technology, causing longer survival rates. The old Dread Disease Policies often paid benefits for conditions that were not treatable and resulted in death.
If the patient dies, the need for insurance is filled by the Life Insurance policy, and Dread Disease Insurance is not needed. Also, many Cancer Policies are indemnity-type contracts paying benefits only for specific types of services or treatments. Critical Illness Insurance will pay lump sum benefits for conditions that are treatable today.
REFERENCE:
7Journal of the American Medical Association, December
21, 1994 - Vol.272, No.23.