There are three categories of Living Benefits:
- Long Term Care Insurance
- Critical Illness Insurance
- Disability Insurance
It is generally more difficult to qualify for Living Benefits Insurance than Life Insurance. In Canada approximately 50% of applications for Living Benefits are approved while some 91% of Life Insurance applications are successful.
Long Term Care
This is an income replacement benefit. If you are unable to perform any 2 of the 6 activities of daily living you will receive a weekly income (the amount having been specified by you in the application), tax free and while you are on claim, the monthly premium is not payable. Upon recovery premium payments re-start and the benefit coverage continues.
The 6 activities of daily living are:
- Bathing
- Dressing
- Eating
- Toileting
- Transferring
- Continence
Care can be provided by anyone you choose and anywhere you choose.
Let’s take an athletic 32 year old, self-employed, female single Mom earning $95,000 annually. She takes a tumble when mountain biking, fractures her pelvis and ends up in a body cast. She now needs others to dress and feed her until she is back on her feet. Even if her income continues she may need extra income for a caregiver, housekeeper, therapist or private nursing.
As an example a Long Term Care policy could provide her with $1,000 per week tax free income for as long as she fits any 2 of the 6 criteria, to a maximum of 100 weeks for a monthly premium of $36 (at current rates).
This is a very ‘Claimable’ insurance, and there are only a few insurance companies in Canada providing Long Term Care insurance. Rates are rising and this type of insurance may not be available in the future, certainly not in it’s present form. On Feb 06, 2013 The New York Times carried a piece entitled “For women, reduced access to long term care insurance” which is on-line and well worth a read. Although US Long Term Care insurance benefits are much better in Canada, the high level of claims, especially by women, and the consequent pressure on insurance companies is similar.
We suggest that if you anticipate a need for Long Term Care insurance get it now while you can, especially if you are a woman.
Critical Illness
This provides a lump sum payment upon diagnosis of any of the illnesses covered in the contract. The illnesses covered are similar from insurance company to insurance company but not necessarily the same and definitions can vary. Sun Life, for example, have 25 conditions covered at the present time.
Upon diagnosis of any of the covered conditions, and provided survival for 30 days (in most cases), the insured amount as decided by you in the application is paid.
A 32 year old male, non-smoker would pay a premium of approximately $35 a month (at current rates) for $100,000 of Critical Illness insurance for the next 10 years.
Critical Illness Insurance (CI) is also available for infants and children. These policies are often funded by parents or grandparents.
A Return of Premium feature is often added, especially for Child CI policies. In the event that there is no claim on the policy (which is what we hope) the Return of Premium feature will result in all premiums paid being returned. An effective way of saving for the child’s education or perhaps down payment on a first house.
Insurance companies offer different features. For example Canada Life provide a 100% Return of Premium option when the insured reaches age 25. A newborn female Childhood CI policy would cost around $58 a month, with around $13,500 being refunded at her age 25.
Childhood CI is available for children from age 60 days to 17 years.
Disability Insurance
There are two types of Disability Insurance, Accident and Illness.
These are typical income replacement plans in the event that you are unable to work. The amount of monthly income provided in the event of a claim is determined at time of application and is directly related to your earned income.
The premium is decided in part by your regular occupation but there are many other variables in determining premium rates. If you are not covered through work, you should seriously consider looking at some form of Disability Insurance. We would be happy to walk you through the process and get you a quote.
