The Next Wave of Insurance

By Cathy Blackwell

How often have we been told of the importance of buying life insurance to protect loved ones should we die prematurely? To many, that’s good advice. But now we are being told by insurance companies and agents to buy insurance in case we keep living.

It’s called critical illness insurance (CII), and as you may have guessed, selling this relatively new product is proving to be no less of a challenge than selling life insurance at the beginning of the century.

What exactly is critical illness insurance? Mark Weicker, Critical Illness Insurance Product Manager at Clarica, explains it’s an insurance plan that can help CII policyholders who are diagnosed with any one of eighteen covered serious illnesses. People who find out they have a critical illness will need money for a host of difficulties and necessities that might arise, such as special medical treatment, renovating their home for wheelchair access, help around their home, even paying down debt or taking a much-needed vacation.

Weicker has a simple explanation, “Consider it protection for the living, because you don’t need to die in order to collect the benefit.”

Critical Illness Insurance

Here’s how CII works. You buy a policy worth, let’s say, $100,000. You pay a monthly premium, just like life insurance. Then tragedy strikes. After various humbling tests, doctors tell you that you’re suffering from one of several serious illnesses that are covered by critical illness insurance. You’ve paid your premiums and kept your policy in force, so you’re entitled to make a claim to receive the $100,000 lump sum benefit.

Most insurance companies offering CII have basic plans covering cancer, heart attack, stroke, and coronary artery bypass surgery. Weicker believes all CII policies should include those four core diseases and illnesses, which have the highest incidence rates.

More extensive plans offer additional coverage for Alzheimer’s, Parkinson’s, kidney failure, major organ transplant, blindness, deafness, Multiple Sclerosis, ALS (amyotrophic lateral sclerosis, also called Lou Gehrig’s disease) or other motor neuron diseases, occupational HIV (human immunodeficiency virus), coma, benign brain tumor, paralysis, loss of limbs, and severe burns.

Sobering Statistics

The grim reality is that critical illness is more common than you may think:

• One in four Canadians will contract a critical illness by the age of 65 (Heart and Stroke Foundation, 2001)
  
  
• The average age of people who make claims on their critical illness insurance policies is 47 (Munich Reinsurance Company, 2000).
  
  
• 41% of men and 38% of women will develop some form of cancer in their lifetime (Canadian Cancer Society, 2002).
  

Critical illness products haven’t been around that long and Weicker says Clarica was one of the early entries into this product arena in the late 1990’s. It’s a classic business case: demand for the product is based on consumer need, not on some imaginary perception created by the insurance industry.

A Product with a Purpose

A good example of where CII may become increasingly important is in the area of heart attacks. Eighty per cent of heart attack patients survive when they’re admitted to hospital, but only forty-five per cent will be able to return to work (Heart and Stroke Foundation, 2001). Weicker believes that “if a person suffers a heart attack, it’s potentially devastating not only to the person, but also to that person’s family” because of its serious impact on income and savings. Simply put, their finances will be stretched if they can’t return to work.

Could it happen to you? Weicker says, “people are more likely to have a critical illness by age 75 than they are to suffer a premature death. The focus should be on recovery, not worrying about their financial situation.”

One way to ease that worry is to invest in insurance created for that specific purpose. “With CII, you can alleviate some of the financial concerns and concentrate on getting better.”

What About Cost?

Because you’re more likely to get a critical illness than die prematurely, insurance companies must make sure they’re charging enough to cover their risk.

Premiums depend on the applicants’ health, the face amount they want, and the age at which they apply. Many applicants are surprised when they get a risk rating. Being overweight, high blood pressure, and a family health history of heart disease will all contribute to a higher rating, thereby increasing the premium.

A rating can also be an early warning sign—a possible opportunity for you to improve your health. For example, if you’re rated because of excess weight, shedding the weight will decrease the risk of a critical illness as well as your premium.

The first step you should take if you’re interested in finding out more about CII is talking to an insurance advisor. Your advisor can explain the definitions of critical illnesses, and tell you what’s included in the policy and how much your premium will be.

Weicker’s enthusiasm for the product is motivated by a desire to help people. “Everybody has stories about close family, friends, or associates who could have used the benefit this insurance provides.”

“This product addresses an obvious need.” Critical illness insurance makes good common sense. It’s insurance for the living.

Cathy Blackwell is a Member, Advocis with Sunlife, 1 Commissioners Road East, Unit 101, London, ON N6C 5Z3. She can be contacted at (519) 680-2382 ext. 266 or by email at cathy.blackwell@sunlife.com.

Published in Networking Today, May 2005.