Below are some excerpts from an article written by Sun Life Financial. Though directed at advisors, the points made regarding Critical Illness Insurance, particularly for young children, are very much worth considering.
Being a grandparent is a time of great joy. They delight in seeing their family grow and being part of their grandchildren’s lives. But they also know that life’s unpredictable and they could have some concerns:
- What does the future hold for my children and grandchildren?
- How would they cope during difficult times, such as developing a serious illness?
- How can I help protect them?
When a child gets sick
A critical illness can have devastating consequences — physical, emotional and financial — and CII can help. Essentially, when illness strikes, CII for adults eases both the financial and emotional strain. So does CII for children. When a child insured by a CII policy is diagnosed with a covered illness and survives the waiting period, the policy owner receives a lump sum payment that can be put toward medical and other costs that could, otherwise, pose big financial problems.
In Ontario, families of children with cancer incur an average of more than $28,000 in costs in the first three months following a child’s diagnosis.
Source: Tsimicalis, A. Costs Incurred by Families of Children Newly Diagnosed with Cancer in Ontario. University of Toronto, 2010.
Drug and travel expenses can be particularly steep:
- About 75 per cent of newer cancer drugs taken at home cost more than $20,000 and the average cost of a single course of treatment is $65,000 — and as medicine continues to advance, many health-care costs will keep climbing. Government and personal health plans may cover some but not all of them, creating a financial burden beyond many families’ means.
- In a six-month period following their daughter’s diagnosis of Hodgkin’s lymphoma, a rural Manitoba family made 22 trips to Winnipeg and four trips to Brandon for the required treatment. During that time, they spent approximately $12,000 on gas, parking, accommodation and meals.
Complicating matters is the potential loss of income. Parents of critically ill children often need time off work to accommodate treatments and hospital stays. Some opt for reduced work hours; others must quit their jobs entirely, resulting in less money to pay mounting debt. In fact, studies indicates that families can lose up to one-third of their pre-diagnosis, after-tax income while a child is in treatment.
That’s where CII for children comes in. By easing the economic burden of serious childhood illness, families can focus on their child’s recovery versus how they’ll pay the bills. In addition to coverage for illnesses such as cancer, stroke and acquired brain injury, child CII plans often cover childhood conditions such as cerebral palsy, congenital heart disease, cystic fibrosis, muscular dystrophy and type 1 diabetes mellitus.
CII may also give clients access to value-added benefits such as Best Doctors. Best Doctors is an international physician network that helps families better understand a child’s medical condition and treatment options. When facing the uncertainty of a serious illness, Best Doctors provides a range of services to help secure the right information, the right diagnosis and the right treatment.
Each insurance provider has their own Critical Illness Insurance product, with different options available. Here is an example using Sun Life’s T75 with Return of Premium and Long Term Care conversion options:
- When George and Sheila’s granddaughter, Sarah, is 5 years old, they purchase a Sun CII policy for her with $100,000 coverage until age 75 (T75). They include the return of premium option, which means they’ll get some of their premiums back if Sarah remains healthy throughout her childhood. Because of Sarah’s young age, George and Sheila’s monthly premium is just $63. This premium will stay the same for the life of the policy (assuming Sarah provides a non-smoker declaration at age 18).
- Sarah enjoys a healthy childhood.
- On Sarah’s 18th birthday, George and Sheila apply to add the long-term care conversion option to her CII policy. For a small additional amount of premium, this gives Sarah the ability to convert her critical illness coverage to long term care insurance (LTCI) when she’s older.
- When Sarah turns 25, because of the return of premium option, her grandparents are automatically refunded 75 per cent of the eligible premiums they paid (which comes to $11,291). They give this money to Sarah to help with the down payment on her first home. At this time, George and Sheila also transfer ownership of the policy to Sarah. Sarah assumes the monthly premium and maintains $100,000 of CII.
- At 40, Sarah can choose to continue her coverage or cancel it and receive the accumulated return of premium on cancellation benefit of $15,055. If she maintains her coverage until age 60, the return of premium benefit would be $30,110.
- Between ages 60 and 65, Sarah can choose to keep her coverage until it expires at age 75 or convert all or a portion of it to a lifetime LTCI solution, using some or all of her return of premium benefit to help pay for this new coverage.