This e-newsletter is focusing on two living benefit insurance products, Critical illness Insurance and Long Term Care Insurance.
Below are some sobering statistics about the chances of Canadians suffering a critical illness:
- Canadians are 10 times more likely to be unable to work because of a critical illness than to die before age 65.
- It is estimated that one out of every two heart attack victims are under age 65.
- One in three Canadians will contract some sort of life threatening cancer.
- Over 50,000 Canadians suffer a stroke each year.
- 70% of all open heart surgeries are for coronary bypasses.
Many advocates of disability insurance maintain that critical illness coverage is an important part of any comprehensive disability insurance package. Nearly all critical illness policies offer insurance covering the Big Four conditions (heart attack, stroke, cancer and coronary artery disease requiring surgery). Some policies cover 10 conditions while others are comprehensive policies and offer much more coverage including Parkinson’s disease and occupationally acquired HIV.
The main benefit of having critical illness coverage is that when a critical illness is diagnosed, and the insured survives for a minimum of thirty days from the date of the diagnosis, the insurance company pays a tax free lump sum benefit ($25,000 to $2 million) to the insured to use whichever way he or she sees fit.
Baby boomers (born between 1946 and 1966) are growing older and are now starting to experience health conditions associated with aging. Long term care policies will cover insured patients when these individuals have lost their cognitive ability or can no longer perform at least two Activities of Daily Living (ADLs) such as feeding themselves, dressing themselves, toileting by themselves, moving or transferring by themselves, etc.
LTC pays a tax free daily benefit for those who need some form of professional daily care as the result of an accident, illness or just aging. The benefit may range from $10.00 daily to $200 or more daily.
See how well you do in answering the following questions on these two products. The answers to these questions and rationales are at the end of the e-newsletter.
1. Ralph is seventy-five years old and suffers with complications from arthritis. He needs someone to help him get in and out of bed each morning as well as getting in and out of the shower. He is able to eat using a utensil specially made to fit over his thumb. He has specially installed hand rails and a toilet in his bathroom, he dresses himself but it takes Ralph some time to fasten his buttons on his shirt.
Based on the information above, does Ralph qualify for Long Term Care Insurance benefits?
- Yes, because he needs daily assistance to help with his mobility.
- No, he cannot perform one of the activities of daily living (ADLs), only.
- Yes, because he needs someone to help him eat, go to the toilet, and take a shower, and to get him in and out of bed.
- No, because he does not have Alzheimer’s or dementia.
2. Which of the following is/are not activities of daily living (ADLs)?
- Preparing food
- Driving a car
- Washing clothes
- All of the above
3. Critical illness insurance pays out the benefit in the following manner:
- Pays monthly and the coverage stays in force
- Lump sum then coverage is reinstated if the insured is under age 65
- Lump sum and usually the policy is terminated
- Lump sum and the coverage always stays in force
1. b. No, he cannot perform one of the activities of daily living (ADLs) only, which is transferring or mobility. He must not be able to perform two or more of the ADLs.
Rationale: Ralph only requires assistance with one activity of daily living (ADLs), and that is transferring or mobility. To qualify for benefits on a LTC contract he must lack cognitive ability or not be able to perform two or more activities of daily livin
2. d. All of the above
Rationale: ADLs include feeding yourself, transferring, washing yourself, etc.
3. c. Lump sum and usually the policy is terminated
Rationale: Some Critical Illness contracts terminate after a benefit is paid and some contracts continue but not always as suggested in answer d.
We at Foran and Advocis want to wish each and every one of you a prosperous 2012, and good luck on your endeavours with the Advocis CFP program.
Ron Foran, CFP, CFA, CLU, FCSI
President, Foran Financial Institute
Ron Foran is the founder of Foran Financial Institute. He has lectured extensively for 25 years on investments and financial planning across Canada and globally. Ron has a passion for teaching, training and assisting students to pass exams and is the primary instructor for Foran securities and investment management seminars. If you want to learn more about Ron or Foran Financial Institute, please go to www.foranfinancial.com. We at Foran and Advocis want to wish each and every one of you a prosperous 2012.