“Hmm, why must I pay for insurance when it only benefits me in the event of an emergency? And what are the chances of me being injured anyway?”
If you are like most lawyers, you do not like paying for critical illness insurance. But what if I told you there was a way for you to get a full refund of all the premium payments; would you be interested then?
Most lawyers have no idea that this is a benefit that may come with their critical illness insurance policy. However, before we talk about getting a refund of your premium payments, let’s discuss what critical illness insurance is, and how it works.
What is critical illness insurance?
Critical illness insurance is designed to provide financial protection if you are diagnosed with a critical illness. The benefit is paid out as a lump sum, which can be used to cover medical expenses, lost income, or any other costs associated with your illness. Most policies will cover a variety of critical illnesses, such as cancer, heart disease, stroke, and kidney failure. In addition to offering a lump-sum payment, it can also provide peace of mind in knowing that you and your family are financially protected in the event of a serious illness.
Do I need critical illness insurance?
If you are a working lawyer concerned about the potential financial impact of a critical illness, then the answer is probably yes.
According to Statistics Canada, Canadians are now living longer because of medical advances. However, critical illness rates are also increasing. The Government of Canada stated that 1 in 12 Canadians live with heart disease. Additionally, 2 in 5 Canadians will be diagnosed with cancer during their lifetime, and 1 in 4 will die. Thus, there is a risk. However, most people survive after having a critical illness.
Return-of-premium rider
Some insurance companies that offer critical illness also provide add-on components to the policy, called “riders”. One such rider is the “return-of-premium” rider. Return-of-premium riders may provide a partial or full refund of their premiums. You can have the premium returned when the policy term expires without use, or it may be returned upon death (usually the cheaper option).
Advantage of return-of-premium (win-win situation)
If you do not make a claim, you will be fully reimbursed for all the premiums you have paid during the term of the policy, and if you do make a claim and survive the waiting period, you will receive the lump-sum payment, which could protect your retirement savings and provide you with tens of thousands of dollars.
Disadvantage of return-of-premium
Firstly, there is a cost associated with the return-of-premium rider. While the return-of-premium rider may be a desirable option for many, the required coverage should never be sacrificed in order to get the rider. Secondly, the premium is returned, but it is returned with no interest, and so there is an opportunity cost in purchasing the return-of-premium rider.
Currently, Canada is the only country offering critical illness insurance with return-of-premium policies – thereby allowing lawyers to have their cake and eat it too!
If you have any questions please feel free to contact us.
