*As published in the Fall 2012 issue of FinanceWorks.ca

No one thinks that they will suffer from a heart attack, stroke or cancer, especially when they’re young and healthy. Yet elite athletes like Lance Armstrong and Mario Lemieux are living proof that critical illness can effect even those that are young and in excellent physical form. Critical illness is life changing, and besides health, can take away people’s financial stability. The time and cost of treatment often results in a loss of income, forcing people to take out loans, draining retirement savings, forcing the sale of homes, and in some cases, resulting in bankruptcy. Critical illness insurance was designed to alleviate the financial strain of dealing with the unexpected.

Critical illness insurance is often more important for a single or younger person as they usually don’t have a spouse to rely on financially or the accumulated assets to support them.

Critical illness insurance pays a lump sum amount to those insured who are diagnosed with a covered critical illness, which is not contingent on being unable to work. The monies can be used for covering treatments not covered by provincial health plans, giving a spouse time off work to help, traveling after recovery, paying off a car loan or house mortgage, or topping up income. In fact the money can be used for anything at all, making it an ideal supplement, which is more valuable than any monthly benefit coverage offered by a work’s disability insurance.

In 1983, Marius Barnard a South African surgeon observed that many of his patients survived cancer, heart attacks, and strokes, only to face financial ruin. After approaching the insurance companies, critical illness insurance was created.

There is a 1 in 3 chance that an insured will collect on a critical illness policy, which shows the importance of having adequate coverage. For the fortunate 2 out of 3 who do not collect on their policies, a return of premium option is available that returns all the money spent on the policy when the policy ends. In that scenario, the policy cost is equal to the potential interest earned if the insured had invested his or her premiums instead of buying the coverage.

At the end of the day, critical illness insurance is another tool in your financial belt.  Along with life and disability insurance, it protects your family and your way of life. Most importantly it gives you options at a critical time; a time when worrying about the money should be the last thing on your mind.