Most clients never stop to think that they could suffer from a serious illness such as heart attack, stroke or cancer. But if they do, chances are high that they might survive, due to advances in medical care.

However, surviving such an illness can present financial challenges for which your clients may be unprepared. For example, they might experience a temporary or permanent loss of income or require costly convalescent care. They may need to make modifications to their home or change their mode of transportation.

In addition, a spouse or partner might have to quit his or her job or take unpaid leave to take care of the ill client, worsening the potential income shortfall. In the meantime, your client would still have to meet ongoing household expenses as well as additional costs resulting from their illness.

According to Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. in Campbellville, Ont., the question you should ask clients is: “Can you afford the cost of being critically ill?”

If an analysis of the client’s financial situation reveals that they will be unable to cover those expenses, then you should discuss the benefits of critical illness (CI) insurance, he says.

CI insurance is a form of health insurance that provides a tax-free lump-sum payment that can be used for any purpose when the policyholder is diagnosed with a critical illness covered by the policy. It is unlike disability insurance, which replaces a portion of your client’s income for a defined period, Geller says.

Typically, CI policies cover four to 25 medical conditions. The premiums, terms and conditions of CI insurance vary among insurers. They also depend on factors such as the client’s age, gender, lifestyle, pre-existing medical conditions and family medical history, as well as the amount and term of coverage and the number of medical conditions covered. The more conditions covered, the more expensive the policy.

Here are some considerations for discussing CI insurance with your clients:

> Assess need
Once you have determined that a client would be unable to meet his or her expenses should they become critically ill, you should then discuss CI insurance, Geller says. It is your responsibility as a financial advisor to know the details of various CI policies prior to recommending an appropriate solution, he says.

He advises that you recommend the product with the broadest range of covered conditions. “You are liable for not adequately counselling clients,” he says. To avoid such liability, “get clients to instruct you with respect to suitability.”

> Consider cost
Clients will naturally gravitate toward having the broadest range of coverage possible. However, if a client cannot afford the coverage that is ideal for them, you may have to discuss what to cut.

For example, Geller says, you can reduce the face amount of the policy or shorten the coverage period. You might also consider whether it is necessary to have coverage for 25 illnesses when more than 97% of all CI claims are related to only five major illnesses: heart attack; stroke; cancer; bypass surgery; and kidney disease.

Any such decision must take into consideration the client’s unique circumstances and needs.

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