'Forced saving plan' for survivors of major illnesses
Thursday 28 December
Ray Turchansky, Journal Business Writer
The Edmonton Journal
Bryan Muir has watched his 56-year-old father deal with heart failure, then have to pay the financial price.
"I've seen how a critical illness can affect someone's finances," says Muir.
An investment and insurance broker with Performa Strategic Wealth Management in Edmonton, Muir suggests investment clients consider critical-illness insurance, which came to Canada five years ago and is now offered by 10 companies.
Just last week, Manulife Financial Corp., Canada's biggest insurance company, bought Commercial Union Life Holdings Ltd., including its critical-illness portfolio. The deal involved insurance assets of $960 million and segregated fund assets of $70 million.
"This agreement will make Manulife the leading player in the critical-illness insurance market in Canada, adding a significant amount of high-quality business," said Geoff Crickmay, Manulife senior vice-president of Canadian individual life insurance operations.
For people wanting to go to the U.S. for cancer treatment unavailable here, or for those wanting to pay for an immediate MRI, critical insurance offers a large tax-free lump-sum payment.
Muir points out that a person needing $50,000 would have to take more than $100,000 out of an RRSP, due to income taxes.
Critical illness insurance resembles disability insurance, but there are differences.
Disability insurance tends to pay a percentage of your salary over a long period of time. And it usually covers total disability.
Critical-illness insurance is a viable choice for the self-employed, pays out a lump-sum within 30 days of diagnosis or treatment, and can cover partial disabilities. Plus, there's the option of getting your premium back at age 65 or 75, if you don't collect on the payment.
"It can be a forced savings plan," says Muir.
More people these days survive life-threatening illnesses. More than half the people with cancer survive at least five years, while 75 per cent of stroke victims and 80 per cent of heart attack victims survive.
The average age for making a claim is 41.
Critical-illness insurance was invented by South African Dr. Christian Barnard, who performed the world's first heart transplant in 1967.
"In South Africa and the United Kingdom now, more critical injury policies are sold than life insurance," says Muir.
Commercial Union offers a number of options.
Lifecheque Primary covers the four primary conditions until 65 -- heart attack, bypass surgery, cancer and stroke.
Lifecheque Level covers 18 conditions until age 75 -- the four primary conditions plus multiple sclerosis, kidney failure, coma, major organ transplant, paralysis, severe burns, deafness, blindness, loss of limbs, loss of speech, occupational HIV, Lou Gehrig's disease, Parkinson's disease and Alzheimer's disease.
Lifecheque Renewable covers all 18 conditions until age 75, but like term insurance, premiums increase upon renewal every 10 years.
Lifecheque Permanent covers diagnosis of some conditions until age 75 and the rest for life.
Other options include Return of Premium at age 65 or 75 if you don't make a claim, and Children's Lifecheque covering your youngsters.
Premiums vary according to sex, age, whether you smoke, and type of coverage.
"The ideal people to target is the 25-year-old man starting his career," says Muir. "To get $100,000 coverage with return of premium is $40 a month."
For 30-year-old non-smokers wanting $50,000 coverage of Lifecheque Level, males pay $30 a month or $32.85 a month with return of premium, while females pay $27.18 a month or $29.52 with return of premium.
"I try to encourage all my clients to take the Level coverage, but to also take the return of premium. At 65 or 75 I'd like to be able to give somebody some of this money back," says Muir.
For 50-year-old non-smokers wanting $50,000 of Level coverage, males pay $83.97 a month or $111.87 with return of premium, compared to females paying $66.02 a month or $94.28 with return of premium.
"This is where I might suggest term (Lifecheque Renewable). If you only have another 10 years until you retire, why crank out a whole bunch of money?"
As the debate over
privatization of public health care continues, the critical illness insurance