Critical Elite Planning Illness Insurance Group
Critical Illness Insurance Peace of mind protection when you need it the most
Critical Illness Insurance
Critical Illness Insurance
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Few people want to discuss Critical Illness Insurance.
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However, as we all get older it seems that more and more of our friends and family are forced to deal with the challenges associated with cancer, heart attack or stroke.
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We have witnessed first-hand the dramatic effects of being diagnosed with a serious medical condition.
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Over the last few years we seem to be paying out almost one Critical Illness Insurance claim every 4 months.
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Virtually every claimant has the same story – I never thought
it would happen to me and I am so thankful for the insurance we put in force.
The next 15 years…
Critical Illness Insurance
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The next 15 years is a very important time in your life.
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It may be period of “Growth” or a period of “Transition”.
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In either case, a serious medical condition can dramatically alter your family’s financial picture.
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While you may prefer to believe that a critical illness is unlikely to happen to you, most thoughtful people realize that serious illness or injury does not discriminate.
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There is a 2% chance of death prior to age 65 compared to a 20% chance of suffering a Critical Illness.
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Let’s consider how we can provide “Peace of Mind” insurance over the next 15 years.
How does it provide “Peace of Mind” ?
Critical Illness Insurance
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Provides tax-free cash at the time you need it the most.
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The money can be used in any way you wish.
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It could provide immediate relief for the payment of ongoing expenses, pay for a temporary replacement or fund alternative treatment options.
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It is a living benefit paid to you.
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It is not dependant upon your ability to work.
What is Critical Illness Insurance?
Critical Illness Insurance
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It is an insurance product.
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Pays a pre-determined lump sum tax-free benefit in the event you are diagnosed with 1 of 25 covered conditions.
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You choose the lump sum amount at time of purchase.
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You choose the type of plan (term or permanent).
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You choose the “optional” benefits (such as a “Return of Premium” rider).
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The insurance company chooses to offer it to you.
Covered Conditions
Critical Illness Insurance
Stroke Life Threatening Cancer Aortic Surgery Bacterial Meningitis Deafness Loss of Speech Major Organ Failure Multiple Sclerosis Parkinson’s Major Organ Transplant Heart Valve Replacement Severe Burns Coronary Artery Bypass Surgery
Heart Attack Alzheimer's Aplastic Anemia Blindness Kidney Failure Coma Loss of Limbs Occupational HIV Paralysis Benign Brain Tumour Congenital Heart Disease Loss of Independent Existence
When is a claim paid?
Critical Illness Insurance
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The Critical Illness Lump Sum Benefit is paid out once you are diagnosed with a covered condition and survive a minimum period of 31 days*
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It is not a death benefit – it is a living benefit
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The waiting period for Occupational HIV, Bacterial Meningitis and Loss of Independent Existence is 90 days. The waiting period for Loss of Speech and Multiple Sclerosis is 180 days (as most of these conditions require a longer period to diagnose).
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If a full benefit is paid out the policy ends.
Is there a “Prevention” benefit?
Critical Illness Insurance
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Yes! Certain medical conditions are very serious but do not put the patient’s life in danger if diagnosed at an early stage.
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You would be eligible to receive a benefit equal to 10% of the lump sum amount (to a maximum of $50,000) if you are diagnosed with: • malignant melanoma • stage 1 prostate cancer • coronary angioplasty • ductal carcinoma in situ of the breast.
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The lump sum amount is not reduced if a “Prevention” benefit is paid.
Is coverage expensive?
Critical Illness Insurance
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No. A non-smoker male age 45 can provide $100,000 of protection for the next 10 years at a net cost of $50 a month.
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We are also able to structure the plan to provide coverage for the next 15 years for free!
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This would be accomplished by including a “Return of Premium” feature to the policy.
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If no claim occurs over a 15 year period then all premiums paid are refunded on a tax-free basis.
How are premiums determined?
Critical Illness Insurance
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Age
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Gender
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Smoker or non-smoker
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The type of policy you purchase (“term” or “permanent”)
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The lump sum amount
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Any “optional” benefits
Critical Illness Proposal
Critical Illness Insurance
ABC Inc.
Critical Illness Proposal
Critical Illness Insurance
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Intent is to provide protection of $500,000 for each executive.
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At claim time the $500,000 Critical Illness benefit is payable to the insured tax-free.
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The coverage will be structured on a “Level Term to age 100” basis with locked in premiums
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A “return of premium” feature will be added that returns 75% of all premiums paid after 10 years or 100% of all premiums paid after 15 years if the policy is terminated.
Over the next 10 years
Critical Illness Insurance
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If a “Full” claim occurs the insured receives $250,000 and the policy is terminated. There is no refund of premiums.
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If a “Prevention” claim occurs the insured receives $25,000 and the policy remains in force.
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If we were to use “Term to 100” with “Return of Premium” then at the end of the 10 years if the policies were terminated the beneficiary of the “Return of Premium” benefit receives 75% of the total premiums paid (normally this is the insured).
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If a death occurs the policy is terminated and there is no refund of premiums.
Over the next 15 years
Critical Illness Insurance
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If a “Full” claim occurs the insured receives $250,000 and the policy is terminated. There is no refund of premiums.
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If a “Prevention” claim occurs the insured receives $25,000 and the policy remains in force (“Refund of Premium” is not affected).
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If we were to use “Term to 100” with “Return of Premium” then at the end of the 15 years if the policies were terminated the beneficiary of the “Return of Premium” benefit receives 100% of the total premiums paid (normally this is the insured).
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Hence the net cost over the 15 years is $0 a month.
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If a death occurs the policy is terminated and there is no refund of premiums.
Why is there no Premium Refund on Death?
• Critical Illness Insurance
This is for two reasons: • If a death benefit is desired then the premium for a “return of premium on death” rider is best used for more life insurance. • It prevents the policy from falling under the Life Insurance Act and hence avoids being ruled a “deemed disposition”
Premium first 15 years Personally Owned
Critical Illness Insurance
Total Premiums Paid After 15 years
Total Premiums Refunded to Insured if Policy is Terminated after 15 years
Client
Age
Critical Illness Tax-Free Benefit
Joe
45
$250,000
Joe
Basic & ROP
$5,882
$88,237
$88,237
Jane
42
$250,000
Jane
Basic & ROP
$4,517
$67,762
$67,762
Premium Payer
Premium Type
Annual Premium
What about if incorporated?
Critical Illness Insurance
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We would establish a “Group Accident & Sickness” plan for all employees or for any class of employees via a board resolution.
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A “Group” is defined as 2 or more individuals.
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The corporation can then pay and deduct the premiums for Critical Illness policies provided under this board resolution.
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The “Return of Premium” is a separate premium and it is recommended this premium be paid for personally (if paid corporately please seek the opinion of your Accountant).
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The Corporation would be the owners of the policies. (note CRA has never ruled on the ROP feature of CI)
Premium first 15 years Corporately Owned
Client
Age
Critical Illness Tax-Free Benefit
Joe
45
$250,000
Critical Illness Insurance
Jane
42
$250,000
Premium Premium Payer Type
Annual Premium
Total Premiums Paid After 15 years
Corp
Basic
$4,165
$62,475
Joe
ROP
$1,717
$25,755
Corp
Basic
$2,810
$42,150
Jane
ROP
$1,707
$25,605
Total Premiums Refunded to Insured if Policy is Terminated after 15 years
$88,230
$67,755
Critical Illness Summary
Critical Illness Insurance
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Over the next 15 years the principle would be insured for $250,000.
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If a full claim occurs the insured receives $250,000 tax free and the policy ends.
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If the insured passes away during this 15 year period then the policy ends and no premiums are refunded.
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If a full claim does not occur and the policy is terminated after 15 years then 100% of all premiums paid both Corporately and Personally are refunded tax free to the executive. • In this case the net cost of coverage for the 15 year period is zero. • As well the Corporation would’ve paid and deducted over $155,000 in premiums that would now be transferred to the insured on a tax free basis. • Note this concept requires 2 insured lives.
Next Steps
Critical Illness Insurance
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While deciding upon amounts of coverage and how to structure the plan, we should approach the Insurance company to see if they are willing to underwrite the risk.
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We would recommend a carrier that has a full return of premium after 15 years (some insurers have a minimum 20 year period).
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Applications will require completion and there also may be a need for a paramedical exam, blood profile and/or urinalysis.
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There is no premium payable until a policy is issued and accepted.
Sample Board Resolution Sample Resolution to establish a Grouped Critical Illness Plan The Company [XXXX name] has determined it’s in its best interests to provide supplementary health benefits for certain classes [identify class of employee] of employees. It’s resolved that: the Company establish a grouped critical illness insurance plan
Critical Illness Insurance
the employees eligible to be included in this plan are [identify employees, e.g. senior executives, senior managers, etc.] the Company apply for individual critical illness insurance policies to insure those employees for an insurance amount equal to [insert formula, e.g. 2 times annual salary.] the Company will own and pay the premiums for the individual critical illness insurance policies purchased under the plan any benefits payable under the policies will be paid directly to the insured employee by the insurance company, and on termination of the plan or termination of the employee’s service, the Company will immediately assign ownership of any policy that was purchased under the plan insuring that employee, to that insured employee. A motion was made by [name], seconded by [name] and after discussion, the resolution was approved by a majority of the directors of the Company.