Q&A - Answers to basic questions No. 7 to 13

- - (full list of questions)


7. What are the main types of life and health insurance everyone should be aware of?

Since there are various kinds of risks, there are various kinds of insurance policies as well that you should consider. It is also important to take account of your wishes, responsibilities, and time horizon, when compiling an insurance portfolio.

The cheapest form of life insurance is term insurance, but if you need protection for the long run, you are probably better off with permanent insurance (a.k.a. whole life insurance). Universal life insurance offers very important money management advantages, beyond the basic function of protection as well. Its creative applications make it important even for people who do not really need or want to ensure a death benefit to anyone when they die. Somewhat similarly to universal life insurance policies, segregated funds also combine two basic component, risk protection and pursuing investment gains.

Many people do not know enough about a very basic new type of insurance, critical illness insurance, that is relevant basically to everyone, but perhaps even more so for single and/or self-employed people. With changing demographics and deteriorating health care system, another new type of protection, long term care insurance, will surely become more popular. These new policies, while similar to traditional disability plans in some sense, are basically complementing and not substituting those.

An important development of the industry is that there are more and more policies (extended health and dental care, business overhead protection plans, injury only protection, etc.) available to self-employed and lower income people who were somewhat neglected before.


8. What are the main new trends in life and health insurance?

Responding to new developments in demography, society, medicine, etc., the insurance industry has come up with new offerings, such as

  • fine-tuning of term insurance policies (differentiated premiums)
  • improved investment options in, and new kinds of application of, universal life policies
  • wider availability of disability insurance protection
  • critical illness insurance
  • long term care insurance
  • more alternative options and riders

Besides, because of competition, consumers' demand (fortified by court decisions, among many things), and technological progress, insurance companies are becoming more responsive and accountable.


9. What is the essence of critical illness insurance?

Critical illness insurance protects the increasing number of people who survive certain life threatening situations. This kind of policy

  • pays the contracted lump sum, tax free, 30 days after the diagnosis of any of the predetermined conditions
  • pays benefit only once in a lifetime
  • is available as either a renewable term, or a permanent policy
  • is available for some people who cannot buy disability insurance
  • usually returns the paid-in premium if the insured dies without having been eligible for the contracted benefit, or at the end of the protection period if no benefit has been paid

The list of covered conditions varies among companies, but there is a common core of the most frequent critical illnesses: heart attack, stroke, cancer, coronary bypass surgery. Besides, most companies cover more or less of the following: kidney failure, Multiple Sclerosis, paralysis, organ transplant, Alzheimer's disease, Parkinson's disease, coma, severe burns, blindness, deafness, loss of speech, loss of limbs, occupational HIV infection, motor neuron disease.


10. Who needs critical illness insurance and why?

The need for critical illness insurance is probably bigger than for any other type of insurance because

  • the chance of suffering a critical illness is very high for any of us (click here and here for some data)
  • the financial loss / costs due to a critical illness can be staggering, even higher than that of death (medical and recovery expenses, lost income, depleted savings, costs of lifestyle / career / home change, costs of extra help, home / vehicle alteration, fulfilling a dream, paying out a mortgage, etc.)
  • it's a myth that social / government support can cover all the financial needs created by a life threatening situation
  • one can get and use this kind of protection even if he/she doesn't earn an income
  • one may not have kids or someone else to be responsible for, but aren't we always responsible for ourselves at least?

Shortly, this kind of protection is basically for everyone.


11. What if I have group health and disability insurance from employers, professional associations or WCB?

If your employer offers you group health and disability insurance: good for you, accept it without much hesitation. However, be aware of group policies' weaknesses as well.

  • Their protection can be lost (perhaps at a time when needed most), their coverage is more limited and less flexible than that of individually owned policies.
  • Insurance benefit (the monthly income replacement these policies pay if you are disabled) is taxable if the employer paid at least part of the premium, while it is tax-free from individually owned policies.
  • WCB protects you only form the consequences of injuries while on the job (not 24 hours a day) or of illnesses that can be clearly attributed to bad working conditions.
  • Group policies, in general, offer less control, fewer guarantees, less flexibility and options, worse definitions (meaning less protection) than what someone can get in individually owned disability policies.

It might be a good idea for you to get a quote for an individually owned disability policy that is adjusted to your own personal circumstances. With that in hand, you can make meaningful comparison of various costs and benefits, strengths and weaknesses. For many people, some kind of combination of the two is perhaps the optimal solution.


12. Will OHIP not cover me if I get sick?

No, unfortunately, OHIP will not cover all the costs of a serious health problem.

  • There are many cost due to an illness that are not closely related to the cure of the client.
  • A motorized wheelchair is about $8,000-10,000, a nurse is about $240 per 8 hour shift, the conversion of an existing mini van to the needs of a disabled person is more than $12,000, that of a toilet, shower and sink is about $8,000-15,000, ... and the list could be continued
  • There are certain ways, tools, and methods available for curing a person that are not covered by OHIP (nontraditional / natural medicine, sometimes the latest technological achievements, etc.)
  • With increasing frequency, there is a long waiting period for medical services, or people have bad experiences with the quality of care provided by government run hospitals. These things induce people to seek medical service elsewhere, perhaps outside the country. Many people cannot afford such options financially, even if they want it. Insurance can give more freedom in this regard.
  • According to the estimate of the Canadian Cancer Society, about two thirds of cancer treatment related costs, that can be several tens of thousands of dollars, are not covered by provincial health plans.

When considering the financial consequences of a mishap, one should always include not just the direct costs but the loss of income as well.


13. Why is it said that disability insurance is available for more people today? For whom, actually?

More people can buy disability insurance today than in the past. Insurance companies finally discovered that

  • self-employed people,
  • business owners,
  • part time workers,
  • low income earners, and
  • people in occupations that were previously considered too risky or just not attractive enough for insurers,

actually create a large group of people who need and want disability insurance.
Today, several companies offer special products for these people. One can buy at least some coverage even without the usually required evidence of past regular income. This feature is especially important to new business owners.

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Key areas:

Life and health insurance (including disability, critical illness, and long-term care protection)

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