Physicians understand better than most people the burden of disability and critical illness. There is not only a physical toll to contend with, but also a financial one. Two related insurance products can help to alleviate the worry and the potential financial impact arising from a critical illness or disability.
Most physicians are familiar with disability insurance, which provides an income stream in the event a period of sickness or injury prevents you from being able to work and generate income.
Critical illness (CI) insurance, a newer product, provides a lump sum payment if you can't work as a result of a number of conditions, including heart attack, stroke, cancer, multiple sclerosis, and paralysis.
"Both products fit together as part of a sound financial plan," says Alban Moran, Senior Consultant, OMA Insurance.
A policy like the OMA Disability Income (DI) Insurance is a simple, cost-effective way of providing steady tax-free income during your disability, enabling you to focus on your recovery. Premiums depend on the monthly benefit (the eligible amount is relative to your earned income), and how soon benefits are payable after the onset of the disability.
DI coverage lasts until age 65, and you do not need to be 100% disabled to collect. The payments are based on your proportional loss of income if you are unable to perform the essential duties of your regular occupation.
"The idea is to protect net earned income before taxes, after business expenses," says Moran.
While DI revolves around the definition of "disability," the only thing you have to prove with CI insurance is your critical illness. The CI payment is made within 30 days of a diagnosis.
"One advantage of CI is there are no limitations on how the money can be used," says Moran.
Depending on your illness and circumstances, with CI you can choose to put the lump sum payment toward drugs, medical equipment, experimental treatment, out-of-country care or recuperation, home modifications, or a personal support worker. But the money could just as easily go toward paying a mortgage or other debts, starting an early retirement, or replacing a spouse's reduced or lost income should he or she be thrust into the caregiver role.
"In essence, CI can be considered the equivalent of an 'emergency fund,' " says Moran.
A disability can happen to anyone and at any time. In fact, you have a one-in-three chance of becoming disabled for 90 days or longer at least once before age 65. A critical illness can strike just as suddenly. For example, in Canada, more than 70,000 heart attacks and 50,000 strokes occur each year, and almost 3,100 people a week are diagnosed with cancer.
States Moran: "With DI paying monthly benefits to protect your family's security and lifestyle, and CI offering a lump sum that you are free to use any way you wish, the two products definitely complement each other."