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Critical illness insurance offers financial support if you are diagnosed with a life-threatening disease, like cancer or heart attack. The lump sum benefit paid by the insurance company can help cover medical costs and pay for daily living expenses while you focus on recovery.
While the base critical illness policy provides the core coverage, you may consider upgrading it for better protection. That’s where critical illness insurance riders come into play.
What are critical illness riders? Which ones can you add to your policy, and which ones are worth it? In this post, we delve into the intricacies of these add-ons, illustrating how they extend beyond standard policies to provide a crucial layer of protection.
What Is A Critical Illness Rider?
Insurance riders are optional benefits you can add to your insurance policy to upgrade the coverage. For example, a common rider on a life insurance policy is the accidental death benefit, which increases the death benefit if you die from an accident.
Your cost will increase through a higher premium on your policy in exchange for these riders. Therefore, you’ll need to weigh the pros and cons of attaching riders to your insurance coverage.
Critical illness benefit as a rider on a life insurance policy
Did you know you can add critical illness insurance on a life insurance policy? Although the topic of this post is riders that you buy on critical illness coverage, we’d be remiss if we didn’t mention this.
One of the advantages of putting your critical illness benefit on your life insurance policy is simplifying the application and underwriting process. Instead of buying a separate policy, completing two applications and answering medical questions twice, you save time by keeping the insurance coverage together.
Combining your insurance coverage under one policy is also a cost-effective method of buying insurance. On top of saving a policy fee, which is usually $50, some life insurance companies also offer a multi-policy discount.
Disability waiver of premium
The disability waiver of premium is a critical illness rider you can add to your policy for a small cost. This waives the premium payments for the policy after you become totally disabled due to an injury or illness for 90 days. The insurance company will also refund any premiums you paid during these 90 days.
Due to the small premium charged for this critical illness rider, the additional coverage is worth adding, especially if you don’t have long-term disability insurance.
Waiver of premium on applicant's death or disability
Not all applicants buy critical illness insurance on their own lives. Some may insure their spouses, while others may insure their children. In these situations, the applicant owns and pays for the policies, so the life insured may be unable to keep the coverage in force if something happens to the owner.
Similar to the previous critical illness rider, this one is important if the owner doesn’t have any disability and life insurance.
Scheduled increase benefit
A few life insurance companies offer a critical illness rider, which automatically increases the coverage amounts every few years. This helps you cope with inflation since the original amount you applied for may not be sufficient a few years later due to higher medical bills and cost of care.
For example, Industrial Alliance increases your lump sum benefit by 50% on the fifth and tenth anniversary. If you bought $100,000 of coverage, it will increase to $150,000 in year five and $200,000 in year 10.
RBC Insurance’s rider increases your benefits by 20% every two years until the tenth anniversary. Therefore, $100,000 of initial coverage will increase to $120,000 in year two and $140,000 in year four until it reaches $200,000 by year 10.
The cost to add these riders is minimal, but you have to pay for the increased amounts at your attained age.
Second event
Most policies terminate after you are diagnosed with a covered illness and the insurance company pays the benefit. However, Canada Life has a critical illness rider called second event, which provides limited coverage for one of two covered critical illnesses.
This is how it works: if your first claim was for a heart attack or stroke, your existing policy will continue to provide coverage for life-threatening cancer. Likewise, if your first claim was for a life-threatening cancer, you will still have coverage for a heart attack. The second lump sum amount will be the lesser of 50% of the original benefit or $100,000, whichever is less.
Like the previous critical illness riders, the additional fee to include this rider is small. And with most claims being for heart attacks and cancer, it may be worthwhile to add it to your policy.
Child critical illness rider
Instead of buying a standalone policy for your children, you can insure all of them under your policy with a child critical illness rider. Not only is it easier to manage a single policy for your kids, it’s also cost-effective because the price is the same no matter how many children you have. For example, Empire Life has a child critical illness rider that covers up to $50,000 per child.
Return Of Premium Riders
Do you like the idea of getting your money back if you don’t make a claim? That’s exactly what the return of premium riders do. Let’s take a look at the variations of these popular critical illness riders.
Return of premium on death (ROPD)
Although you don’t benefit directly from this critical illness rider, it does pay your loved ones a death benefit equal to the premiums paid into the policy from inception. For example, if your premiums were $1,000 per year and you paid for 20 years before dying, your family would receive a death benefit of $20,000.
You can get the return of premium on death rider on all types of critical illness insurance policies, including term-10, term-20, term-75, and term-100. The wide availability, combined with the low cost, makes this a popular critical illness rider.
Return of premium on expiry (ROPX)
Most policies expire at age 75, except term-100, which lasts a lifetime. If you don’t make a claim during your policy term and maintain coverage until expiry, the insurance company refunds the total premium paid into the policy.
For example, say you bought a critical illness insurance policy at age 35 for $1,000 per year. Your policy expires at age 75, so you pay the premiums for 40 years. If you never suffer a critical illness diagnosis, you will receive $40,000 from the insurance company.
In a way, the return of premium on expiry rider is like a form of forced savings. However, the higher premium, coupled with the fact the insurance company doesn’t pay interest, makes it less commonly bought.
Return of premium on surrender (ROPS)
Also called return of premium on cancellation (ROPC), this critical illness insurance rider is like a more flexible version of the return of premium on expiry. Instead of only getting access to your money upon the expiration of your policy, you can choose when to receive your premiums. Once you exercise this option, you’ll get your premiums returned and your coverage will terminate.
For example, Manulife and Equitable Life let you surrender your policy anytime after the fifteenth year. You can even get a partial refund if you surrender part of the coverage. Desjardins’ version of this rider has a graded refund, returning 50% of the premiums after 10 years and 100% after 20 years.
Because of the added flexibility, the return of premium on surrender rider is also the most expensive option. But in a way, getting your money back while having critical illness insurance is like getting free coverage. And who doesn’t like free insurance?
Built-in Benefits Of Your Critical Illness Insurance Policy
Besides the above critical illness riders you have to buy, most policies also have built-in benefits for no extra charge. Below are some of the more common features you’ll find.
Guaranteed premiums
Most critical illness insurance policies are non-cancellable, meaning insurance companies cannot change the policy provisions or increase the premiums. However, some are guaranteed renewable, which means the premiums are subject to change. You’ll want to make sure you buy a non-cancellable policy for peace of mind.
Early detection
Also called early assistance, early intervention, or early discovery, this provides a smaller lump sum benefit for less severe critical illnesses. For example, Foresters pays 15% of your chosen benefit, or $50,000, whichever is less, upon the diagnosis of a non-life-threatening condition like early prostate cancer or coronary angioplasty. If you were later diagnosed with a serious illness like a heart attack, your benefit payment will be reduced by the early detection benefit.
Long-term care conversion option
If you are no longer independent in the late stages of life, the biggest drain on your retirement funds is the accommodation and medical expenses associated with a nursing home. Long-term care insurance provides financial protection against these costs by paying you a monthly benefit if you can’t perform the activities of daily living, like dressing or feeding.
The long-term care conversion option lets you convert your critical illness insurance coverage to a long-term care insurance policy without medical underwriting. Only a few insurers sell long-term care insurance, with many exiting the market due to several factors. Therefore, not many of them offer this built-in benefit. In fact, Sun Life and RBC Insurance are the only companies that guarantee a long-term care plan will be available if you choose to convert your critical illness insurance policy.
Extension of expiry
A few major health conditions have a survival period, which you must meet before the insurer pays the benefit. For example, a heart attack diagnosis has a 30-day survival period. If your policy expires during the survival period, your coverage will remain in effect until you die or your benefit becomes payable.
Exchange and conversion
Life is constantly changing, and the coverage you get now may not be suitable for you later. Upon reviewing your critical illness plan, you may realize that you need the financial protection for a longer time.
The exchange and conversion provisions let you either exchange your term critical illness insurance to a longer term (e.g. from term-10 to term-20) or convert it to a permanent plan (e.g. from term-10 to term-100). The best part is you don’t have to provide evidence of good health, meaning you can extend your policy even if your health declines.
Medical expert assistance services
Most insurance companies partner with a medical services company to provide policyholders with access to medical experts. These professionals can:
- Provide an in-depth review of your medical files
- Reduce serious complications that result from a misdiagnosis
- Help you determine the proper course of action for treatment
- Help you navigate healthcare information like wait times, drug funding programs, and health assessment tools
And much more. It’s an invaluable service that policyholders and their families have unlimited access to any time they suspect they have a medical condition—even one not listed in the policy.
Which Critical Illness Riders Will You Get?
As we’ve explored, these critical illness riders offer a pivotal layer of financial protection, stepping beyond conventional policies when illness strikes.
Now equipped with insights into the significance of critical illness riders, it’s time to take charge of your financial future. Take action today to explore these riders further, understand their nuances, and make an informed decision.
Consult with an insurance professional, evaluate your needs, and take the necessary steps to you are fully protected against the unexpected. When you are ready, contact us at info@briansoinsurance.com or 604-928-1628 for a free consultation. Or use the form at the bottom to request a critical illness insurance quote delivered straight to your inbox.
Get Your Critical Illness Insurance Quote Now
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
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