Surviving a critical illness presents financial challenges for which your clients may be unprepared. They may require costly convalescent care, have to modify their mode of transportation or make their homes more accessible. Your client’s spouse may have to quit work to provide care, resulting in a loss of income, while the client will still have to meet regular financial commitments.
The question to ask clients is: can you afford the cost of being critically ill? If they can’t, then it would be appropriate for you to talk to them about critical illness insurance.
“Critical illness insurance provides peace of mind while they’re alive,” says Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. of Campbellville, Ont.
Here are some ways to approach the subject with your clients:
> Assess the client’s personal situation
Find out whether the client would experience a financial shortfall if they were to become critically ill, suggests Geller. Try to estimate that shortfall. A good question to get ask is: how much money would the client need in the foreseeable future should he or she experience a major illness? There is additional stress when clients have to use their savings, which can affect clients psychologically, says Susan St. Amand, president of Sirius Financial Services in Ottawa.
> Educate them about CI
Your clients might not be aware of the benefits of CI. Although, it has been around for some time, there is a need for CI education, St. Amand says.
On the surface, CI can be an attractive product. Put simply, it provides a tax-free, lump-sum payment that can be used for any purpose should an individual survive a critical illness.
The pricing, terms and conditions of CI depend on many factors, including age and gender; amount and term of coverage; and the number of conditions covered. Generally, premiums are higher for men because they have a higher incidence of common illnesses such as heart attack and stroke. They are generally lower for younger clients.
A basic plan covers only a limited number of common illnesses, such as heart attack, stroke and cancer. A comprehensive plan covers as many as 25 illnesses. Terms of coverage vary, and can range from 10 years up to age 100.
Take advantage of cost flexibility
Although clients may recognize the need for CI, affordability is often the main consideration. Cost can be pared by choosing the right CI product.
Clients typically want as many guarantees as possible, including the bells and whistles associated with the product. However, what clients want and what they need and can afford can be quite different. Ultimately, the decision comes down to what the client can afford.
Affordability can be addressed by recommending lower face-value amounts and shorter term guarantees. “A little bit is better than nothing,” says St. Amand. Clients can prudently decide to buy more affordable, shorter-term guarantees that cover their needs for the foreseeable future.
If cost is a concern, the answers to two questions can aid in the decision:
– Does the client really need, say, $1 million in coverage if he or she can return to work in a few months?
– Is it necessary to have guarantees on 25 illnesses, when more than 97% of all claims are related to only five illnesses?
IE