A side-by-side comparison
There are many different types of insurance designed to protect one of your biggest assets: yourself. There’s life insurance, health insurance, long-term care insurance — some celebrities even protect parts of their body against the possibility of injury.
You might not need to insure your teeth for $30 million, like Julia Roberts, and you probably don’t need $70 million of leg insurance, like David Beckham, but there are types of insurance designed to help you if you can’t work due to illness or injury. These are Disability insurance and Critical illness insurance.
While these two types of insurance have similarities because they can help you and your family with often-difficult personal experiences, they have many important differences and provide solutions to different financial protection needs.
Disability insurance is a monthly payment that replaces some of your income if you can’t work because of an injury or illness. It usually provides you with 60 to 70% of your pre-tax income so you can maintain as much of your standard of living as possible until you can return to work.
Critical illness insurance provides a one-time, lump-sum payment that you can use any way you want if you experience one of the serious conditions as defined by your protection, such as cancer, heart attack, or stroke. Not everyone’s recovery costs are the same. In addition to the possibility of a leave of absence from your job, a critical illness can sometimes mean that you’re left with the costs of recovery. This could include a need for costly assistive devices or even travel expenses — things Disability insurance may not cover.
Why should you get it?
What would I use the money for?
How long does it take to pay out?
Who can apply?
Disability insurance can help you keep up with your existing expenses, but for most, a critical illness comes with costs.
Many people diagnosed with a critical illness may still be able to work and are ineligible for benefits under their disability insurance coverage. On the other hand, if you break your leg and are unable to work, but all you have is critical illness insurance, you might struggle to make ends meet as a broken bone is not ordinarily considered to be a “critical illness”.
To build a complete financial protection plan, it’s important to consider both Disability insurance and Critical illness insurance.
Do you need Critical illness or Disability insurance?
Depending on your situation you may need only Critical illness or Disability insurance, but there are many times when you need both to fully protect yourself. Critical illness and Disability insurance work differently – but together – to help reduce the financial impact of disability or serious illness.
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Contact me for more information and to help determine what makes the most sense in your situation.
* Financial Post, September 9, 2015
** Great-West Life, London Life and Canada Life, August 2015