CHAPTER 2
Critical Illness & Long-Term Care
CI and LTC insurance — what they cover, how they differ from disability income, and when to recommend them.
Critical Illness Insurance
Critical illness (CI) insurance pays a tax-free lump sum when the insured is diagnosed with a covered condition and survives a 30-day survival period.
Core covered conditions (standard 3): 1. Life-threatening cancer 2. Heart attack 3. Stroke
Comprehensive policies cover up to 25+ conditions including kidney failure, major organ transplant, multiple sclerosis, Parkinson's, blindness, deafness, and more.
- Key features:
- 30-day survival period after diagnosis (for most conditions)
- Lump sum — insured decides how to use it (pay bills, take time off, seek treatment abroad)
- Return of Premium on death or on expiry options available
- Does NOT replace income — complements disability insurance
CI vs Disability: CI pays on diagnosis (regardless of ability to work); disability pays when unable to work (regardless of diagnosis).
KEY POINTS
- ✓Pays lump sum on diagnosis — not monthly income
- ✓30-day survival period required for most conditions
- ✓Core 3 conditions: cancer, heart attack, stroke
- ✓Tax-free benefit — no restrictions on how it's used
- ✓Complements, does not replace, disability income insurance
Long-Term Care Insurance
Long-term care (LTC) insurance pays a daily or monthly benefit when the insured can no longer independently perform a specified number of Activities of Daily Living (ADLs).
The 6 ADLs: 1. Bathing 2. Dressing 3. Eating 4. Toileting 5. Transferring (moving from bed to chair) 6. Continence
Most policies require inability to perform 2 of 6 ADLs to trigger benefits. Cognitive impairment (e.g. Alzheimer's) is also typically a trigger.
- Benefit types:
- Reimbursement — pays actual costs incurred up to the daily maximum
- Indemnity — pays the full daily benefit regardless of actual costs
Elimination period: typically 90 days Benefit period: 2 years, 5 years, or lifetime
LTC addresses a risk that neither health insurance nor disability income covers — the need for ongoing personal care.
KEY POINTS
- ✓Triggers: inability to perform 2 of 6 ADLs, or cognitive impairment
- ✓Pays for home care, assisted living, or nursing home
- ✓Indemnity pays full daily amount; reimbursement pays actual costs
- ✓Elimination period typically 90 days
- ✓Addresses the gap between health insurance and disability income