Life can throw unexpected twists your way although no one can guarantee or predict the future, it is best that one is always prepared for such unexpected events. However, you may find that many clients choose to be mindful enough to live by the saying “hope for the best, prepare for the worst.” For them, this may mean having a good insurance policy in place, but as a financial advisor, you may need to ask them that if faced with a critical illness, will their insurance policy be enough to provide them with financial, physical, and mental relief?
If your clients fail to prepare themselves for a significant health emergency, they could end up with severe financial strain and emotional stress. As a financial advisor, it is your responsibility to convey to your clients how crucial it is to have critical illness insurance as part of a financial plan for a stable future. According to the Canadian Life and Health Insurance Association’s (CLHIA) updated list of 2021, there are at least 26 critical illnesses (although not limited to) health conditions listed for which critical illness insurance may be claimed.
These illnesses include:
While trying to convince your clients of the importance of critical illness insurance, you may be asked why they should invest in it when they have medical health insurance or life insurance. You may inform them that for one, unlike life insurance it provides you with living benefits, meaning the insurance pays YOU while you are still alive rather than your beneficiaries after your death.
Furthermore, in case one is diagnosed with a critical illness, if it is one of the ones listed in the policy, they may be eligible to receive a lump sum amount which is tax-free whether the illness or condition is fatal or not. They are free to use that amount in any way they wish. It can be to aid with the expenses that arise from the treatment of the illness, the aftercare that may be required, or other home expenses while one is recovering from that illness.
Convincing clients of the importance of purchasing a critical illness insurance plan can be challenging especially if your clients may be under the improper assumption that the chance of them being inflicted with a severe illness is little to none. They may ask why bother investing in a Critical Illness Insurance Plan?
Make your client aware of the fact that cancer is the leading cause of death in Canada and according to the current statistics 2 in every 5 Canadians are diagnosed with cancer in their lifetime. Furthermore, in 2022, it is estimated that 233 900 new cancer cases will be diagnosed in Canada of which 85,100 deaths may occur.
In 2019, the top 3 leading causes of death included Ischemic heart disease, lung cancer, and stroke. In 2020, although Covid was one of the leading causes of death in Canada (above 5%,) cancer and heart disease surpassed it by far standing at almost 44% of all deaths. In 2021, stroke has been the third leading cause of death in Canada and more than 62,000 strokes occur each year.
It is essential that you convey to your clients that suffering serious illnesses such as cancer, heart disease, or stroke has crippling effects on your health and your finances, which may significantly hamper their road to recovery.
Clients need to be made conscious of the fact that these illnesses often require an exorbitant amount of expenses as compared to other health concerns. The treatment and aftercare often require frequent consultations, medical tests, and for some even at-home professional aftercare which can end up making a huge dent in the patient's life savings.
In addition, the amount of recovery time required to recover from a critical illness, one may be required to lay off work for a while if not permanently. This means their dependents no longer have access to a regular income which may force them to go into a deep financial crisis. Since the amount provided in a CIIP is a lump sum, one can use it wherever it is needed the most. Having the benefit of a tax-free amount to rely on will not only allow them to focus on their recovery but also keep them from touching their life savings or any retirement savings that they may have.
The idea for a Critical Illness Insurance Plan was first introduced by Dr. Marius Bernard and was known as Dread Disease Insurance on 6th October 1983 in South Africa. He found that his patients were suffering from great financial strain after the lingering effects of heart disease, cancer, stroke, and coronary bypass.
Dr. Marius found that his patients, often the breadwinner of the family were often left incapacitated to perform their responsibilities and had dependents that were left without financial support. The ordeal of dealing with their illness was further complicated by financial stress which significantly hampered their road to recovery.
The lump-sum amount allows clients to focus on recuperating rather than them having to feel the pressures of financial concerns or the burdens of their responsibilities to their dependents. Motivated by the financial hardships of his patients, Dr. Marius urged the insurance companies in South Africa to offer a new kind of insurance to people that would cover critical illnesses.
Dr. Marius Bernard said, “I was used to operating on people and boasting about my great results of patients surviving five or six years. But all of a sudden I saw the social and financial implications. I knew nothing about insurance but I knew life insurance paid out on the diagnosis of death. But to me, my patients lived for years but in this time they died financially.”
Unlike life insurance and disability insurance, people are unaware of the insurance benefits and policies that exist to safeguard them against suffering financial strain in case they are diagnosed with a critical illness. With nearly 50% of Canadians at the risk of being diagnosed with some form of cancer in their lifetime, and almost 80% of the population being inflicted with a severe illness or someone they know suffering from one, it is only smart to ensure clients are made aware of the measures they may take to protect themselves if faced with such hardship.
To effectively pitch a critical illness insurance plan to a client, you as a financial advisor must make your client aware that being diagnosed with a critical illness is much more common than they may realize. Furthermore, a well-placed CII plan will ensure that clients can refrain from having to touch their lifetime or retirement savings that they may have saved up. The amount received from a CII plan will not only ease the burden of financial strain that patients often endure but also make their road to recovery much easier.