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Life and critical illness insurance form the bedrock of safeguarding your future and that of your loved ones. Life insurance ensures financial stability for your family in the event of your premature death.
In addition, attaching critical illness insurance as a rider to a life insurance policy adds another layer of protection. This supplementary coverage offers a lump sum benefit upon diagnosis of a covered illness, providing financial support during challenging times.
Should you add critical illness insurance to your life insurance coverage? Or should you keep them separate? Do you even need both? In this post, we answer these questions and more, helping you in your informed decision-making journey.
- Key takeaways:
- While life insurance is crucial if you have dependents, critical illness insurance becomes more important if you don't, as it helps alleviate the financial strain of a serious illness.
- Consolidating both coverages in one policy offers cost savings and streamlines policy management.
- Despite these benefits, bundling may not be the best approach to secure both coverages for you.
What You Need To Know About Life And Critical Illness Cover
Life insurance pays your beneficiaries a tax-free lump sum benefit if you die during the policy term. Your loved ones can use the death benefit to pay for expenses like funeral costs, mortgage payments or rent, debts, and ongoing living expenses. It provides peace of mind, relieving your dependents of financial stress caused by the absence of your income.
Likewise, critical illness insurance makes a tax-free payment. The difference is the triggering event, which is the diagnosis of a life-altering illness covered by the policy. Besides the financial protection offered as income replacement, you can also use the benefit to pay for out-of-country treatment or medical expenses not covered by your provincial health plan.
Covered conditions include life-threatening cancer, heart attack, aortic surgery, coronary artery bypass surgery, multiple sclerosis, major organ transplant, and more. In total, most policies have 25 to 26 covered critical illnesses. Some illnesses covered, like heart attack and other cardiovascular conditions, have a survival period of 30 days before you get paid. There is no critical illness benefit payment if you die during this waiting period.
Which should you get: critical illness insurance or life insurance?
If you are single and don’t have any dependents, you may not need life insurance yet. Instead, your main focus should be protecting your livelihood from an unexpected event. This includes having long-term disability insurance in case an injury or illness prevents you from working.
At the same time, you’d want to buy critical illness insurance to protect yourself financially from the diagnosis of a serious illness. Critical illness and disability insurance form the foundation of your insurance coverage throughout your working life.
Once you start a family, you will need both life and critical illness plans. These will financially safeguard you and your family in case of a serious illness or unexpected passing.
Ultimately, prioritizing critical illness and life insurance depends on your situation. Your needs may change over time, so it’s essential to review the coverage amount on your insurance policies whenever a major life event occurs, like having children or buying a home.
Life insurance with critical illness cover
While you can buy critical illness insurance cover and life insurance separately, it’s not the only option. More Canadians are buying critical illness insurance as a rider on a life insurance policy. A rider is an optional coverage or feature you can add to your insurance product for an extra cost.
Most insurance companies offer the option of adding critical illness coverage as a rider, whether you have a term or whole life insurance policy. If you tack on the critical illness benefit on an existing life policy, the insurance company will underwrite you again. This means checking your health and lifestyle to ensure you are still eligible for coverage.
Why should you get critical illness insurance as a rider on your life insurance policy?
Here are three compelling reasons to merge life and critical illness coverages.
Savings
By bundling life and critical illness insurance coverage, you cut down administrative tasks for the insurance company. Therefore, you only have to pay one policy fee, which saves you around $50 annually.
Some insurers extend savings by providing discounts for multiple coverages. Consolidating various coverages into a single policy can lead to increased savings—the more coverages within one policy, the greater the potential savings. Hence, combining coverage for the entire family under a single policy could be worthwhile.
Easier application process
When you bundle life insurance with a critical illness rider, you streamline the process. Rather than completing two separate applications, facing duplicate medical questions, and undergoing multiple medical exams, bundling allows you to handle these tasks just once.
Simplify policy management
Instead of juggling multiple bills and policy numbers, you’ll have the convenience of a single bill to pay and one policy number to reference. This centralized approach enhances ease of management, reducing the chances of missing payments or losing track of policy details.
This streamlined process not only saves time but also offers a clearer overview of your insurance coverage. Having all your essential protections bundled into one policy simplifies the documentation process. It also minimizes the chances of confusion regarding coverage details, making it easier to stay organized and ensure your coverage remains up to date.
Why should you have a separate critical illness insurance plan?
In some cases, it makes more sense to purchase a standalone critical illness insurance policy. This choice offers more flexibility, allowing for expanded coverage options through additional riders not accessible when bundling life insurance with critical illness cover. For instance, the return of premium riders offer a unique advantage, enabling you to recoup your investment if you don’t file a claim.
Another benefit is the ability to cancel the life insurance policy without affecting the critical illness plan. This is advantageous if you no longer need the life insurance coverage. Bundling may not allow you to do this.
The added flexibility may align better with your needs now and in the future, making standalone critical illness coverage an attractive option.
Can you get a critical illness rider if you have pre-existing conditions?
While it’s possible to get a critical illness rider with pre-existing conditions, it’s not guaranteed. The feasibility hinges on the nature and severity of the medical condition. Even if attainable, it may involve escalated premiums and exclusions.
Due to the stringent underwriting process for critical illness insurance, obtaining life insurance may remain viable even if critical illness coverage is declined. For instance, a history of cancer among multiple immediate family members could lead to a denial for critical illness insurance. However, you may still qualify for life insurance at standard rates under such circumstances.
Frequently Asked Questions
What is the difference between critical illness and life insurance?
While life insurance pays a lump sum benefit to your loved ones in the event of your passing, critical illness insurance pays you a benefit if you’re diagnosed with a covered condition.
Is life and critical illness coverage worth it?
Critical illness insurance is essential to mitigate the financial hardship of a serious illness, while life insurance ensures your family’s financial future is not jeopardized if you die prematurely.
What is the difference between critical illness insurance and a critical illness rider?
A critical illness rider is an add-on to another policy, like life insurance. On the other hand, a critical illness insurance policy provides standalone coverage.
Will Bundling Life And Critical Illness Insurance Work For You?
Integrating critical illness as a rider to a life insurance policy unveils added layers of protection, streamlines administrative processes, and offers cost-effective benefits.
However, merging or maintaining these coverages separately hinges on individual needs, circumstances, and the flexibility desired. It’s not a one-size-fits-all scenario. Assessing personal requirements, weighing the benefits, and comprehending the nuanced differences are pivotal steps in making an informed choice.
Whether bundling life and critical illness coverages or opting for standalone policies, the ultimate goal remains unwavering—to fortify your financial safety net and secure peace of mind for the future.
Contact us at info@briansoinsurance.com or 604-928-1628 for a free consultation on the best way to structure your critical illness policy for you and your family. Or fill in the form below in under 30 seconds and receive a free quote emailed to you.
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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.
