Protecting Your Family

If you have life and disability coverage, you probably believe you’ve done all you can to protect your family in case something happens to you. But there may be a strand missing from your personal safety net.

Suppose you are told you have cancer and need to start treatment immediately. You have disability insurance, but the payments usually won’t start until the end of a waiting period. Disability insurance coverage usually provides a reduced monthly benefit of no more than 70% of pre-disability income and may continue for a limited time. Do you have an emergency fund to look after your family’s immediate financial needs?  What about the additional travel costs to the nearest treatment center?

This is where critical illness insurance can play a role.

Sometimes known as living-benefit or “dread-disease” insurance, critical illness insurance has become increasingly popular since its introduction in 1993.

Coverage typically provides a tax-free, lump-sum benefit of up to $2 million in the event of a specified illness. These can include heart attack, stroke, life-threatening cancer, blindness, major organ transplant, multiple sclerosis, paralysis and other covered conditions.

Keep in mind that only specific illnesses are covered. Protection is not comprehensive, and may vary from one policy and insurer to the next.

Critical illness insurance is not intended to replace disability insurance, but to work with it.

Disability insurance payments usually don’t start right away, though benefits may extend for many years. Some plans have a 90-day or 120-day waiting period before payments begin. Critical illness insurance is designed to meet large, short-term financial needs. Most plans pay their benefits 30 days after diagnosis, filling the gap until disability benefits begin.

Because of the size of the benefits, critical illness insurance can help meet unexpected large expenses and costly treatments not covered by government health insurance plans. Some plans will refund premiums to a named beneficiary if you die without having received plan benefits.

Different people have different needs. It’s important to have the protection you and your family need, but not to purchase unnecessary coverage.

Keep in mind that the odds of suffering a critical illness increase with age.

These are the key factors to examine when you’re shopping for the coverage you need:

• There’s significant variation in prices, terms, periods of coverage, and age limits. Compare policies and coverage carefully and make sure you understand what you’re getting.

• Definitions of illnesses must be made clear. Some companies cover certain types of cancer, others do not.

Critical illness insurance is only one part of a comprehensive insurance coverage plan. Make sure the policy you choose works with the other components of your coverage. Professional advice can help you choose the best plan.

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