Critical

Illness

Insurance

Elite

Planning

Group

Critical Illness

Insurance

Peace of mind protection

when you need it the most

Critical

Illness

Insurance

• Few people want to discuss Critical Illness Insurance.

• However, as we all get older it seems that more and more of

our friends and family are forced to deal with the challenges

associated with cancer, heart attack or stroke.

• We have witnessed first-hand the dramatic effects of being

diagnosed with a serious medical condition.

• Over the last few years we seem to be paying out almost one

Critical Illness Insurance claim every 4 months.

• Virtually every claimant has the same story – I never thought

it would happen to me and I am so thankful for the insurance

we put in force.

Critical Illness Insurance

Critical

Illness

Insurance

• The next 15 years is a very important time in your life.

• It may be period of “Growth” or a period of “Transition”.

• In either case, a serious medical condition can dramatically

alter your family’s financial picture.

• While you may prefer to believe that a critical illness is

unlikely to happen to you, most thoughtful people realize that

serious illness or injury does not discriminate.

• There is a 2% chance of death prior to age 65 compared to a

20% chance of suffering a Critical Illness.

• Let’s consider how we can provide “Peace of Mind” insurance

over the next 15 years.

The next 15 years…

Critical

Illness

Insurance

• Provides tax-free cash at the time you need it the most.

• The money can be used in any way you wish.

• It could provide immediate relief for the payment of ongoing

expenses, pay for a temporary replacement or fund

alternative treatment options.

• It is a living benefit paid to you.

• It is not dependant upon your ability to work.

How does it provide “Peace of Mind” ?

Critical

Illness

Insurance

• It is an insurance product.

• Pays a pre-determined lump sum tax-free benefit in the

event you are diagnosed with 1 of 25 covered conditions.

• You choose the lump sum amount at time of purchase.

• You choose the type of plan (term or permanent).

• You choose the “optional” benefits (such as a “Return of

Premium” rider).

• The insurance company chooses to offer it to you.

What is Critical Illness Insurance?

Critical

Illness

Insurance

Stroke Heart Attack

Life Threatening Cancer Alzheimer's

Aortic Surgery Aplastic Anemia

Bacterial Meningitis Blindness

Deafness Kidney Failure

Loss of Speech Coma

Major Organ Failure Loss of Limbs

Multiple Sclerosis Occupational HIV

Parkinson’s Paralysis

Major Organ Transplant Benign Brain Tumour

Heart Valve Replacement Congenital Heart Disease

Severe Burns Loss of Independent Existence

Coronary Artery Bypass Surgery

Covered Conditions

Critical

Illness

Insurance

• The Critical Illness Lump Sum Benefit is paid out once you

are diagnosed with a covered condition and survive a

minimum period of 31 days*

• It is not a death benefit – it is a living benefit

• The waiting period for Occupational HIV, Bacterial

Meningitis and Loss of Independent Existence is 90 days.

The waiting period for Loss of Speech and Multiple

Sclerosis is 180 days (as most of these conditions require

a longer period to diagnose).

• If a full benefit is paid out the policy ends.

When is a claim paid?

Critical

Illness

Insurance

• Yes! Certain medical conditions are very serious but do not

put the patient’s life in danger if diagnosed at an early

stage.

• You would be eligible to receive a benefit equal to 10% of

the lump sum amount (to a maximum of $50,000) if you are

diagnosed with:

• malignant melanoma

• stage 1 prostate cancer

• coronary angioplasty

• ductal carcinoma in situ of the breast.

• The lump sum amount is not reduced if a “Prevention”

benefit is paid.

Is there a “Prevention” benefit?

Critical

Illness

Insurance

• No. A non-smoker male age 45 can provide $100,000 of

protection for the next 10 years at a net cost of $50 a

month.

• We are also able to structure the plan to provide coverage

for the next 15 years for free!

• This would be accomplished by including a “Return of

Premium” feature to the policy.

• If no claim occurs over a 15 year period then all premiums

paid are refunded on a tax-free basis.

Is coverage expensive?

Critical

Illness

Insurance

• Age

• Gender

• Smoker or non-smoker

• The type of policy you purchase (“term” or “permanent”)

• The lump sum amount

• Any “optional” benefits

How are premiums determined?

Critical

Illness

Insurance

Critical Illness Proposal

ABC Inc.

Critical

Illness

Insurance

• Intent is to provide protection of $500,000 for each

executive.

• At claim time the $500,000 Critical Illness benefit is

payable to the insured tax-free.

• The coverage will be structured on a “Level Term to age

100” basis with locked in premiums

• A “return of premium” feature will be added that returns

75% of all premiums paid after 10 years or 100% of all

premiums paid after 15 years if the policy is terminated.

Critical Illness Proposal

Critical

Illness

Insurance

Over the next 10 years

• If a “Full” claim occurs the insured receives $250,000 and the

policy is terminated. There is no refund of premiums.

• If a “Prevention” claim occurs the insured receives $25,000 and

the policy remains in force.

• If we were to use “Term to 100” with “Return of Premium” then

at the end of the 10 years if the policies were terminated the

beneficiary of the “Return of Premium” benefit receives 75% of

the total premiums paid (normally this is the insured).

• If a death occurs the policy is terminated and there is no refund

of premiums.

Critical

Illness

Insurance

Over the next 15 years

• If a “Full” claim occurs the insured receives $250,000 and the

policy is terminated. There is no refund of premiums.

• If a “Prevention” claim occurs the insured receives $25,000 and

the policy remains in force (“Refund of Premium” is not

affected).

• If we were to use “Term to 100” with “Return of Premium” then

at the end of the 15 years if the policies were terminated the

beneficiary of the “Return of Premium” benefit receives 100% of

the total premiums paid (normally this is the insured).

• Hence the net cost over the 15 years is $0 a month.

• If a death occurs the policy is terminated and there is no refund

of premiums.

Critical

Illness

Insurance

• This is for two reasons:

• If a death benefit is desired then the premium for a

“return of premium on death” rider is best used for

more life insurance.

• It prevents the policy from falling under the Life

Insurance Act and hence avoids being ruled a

“deemed disposition”

Why is there no Premium Refund on Death?

Critical

Illness

Insurance

Premium first 15 years

Personally Owned

Client Age

Critical Illness

Tax-Free Benefit

Premium Payer

Premium Type

Annual

Premium

Total Premiums Paid After 15 years

Total Premiums

Refunded to Insured if Policy is

Terminated after 15

years

Joe 45 $250,000 Joe Basic &

ROP $5,882 $88,237 $88,237

Jane 42 $250,000 Jane Basic &

ROP $4,517 $67,762 $67,762

Critical

Illness

Insurance

What about if incorporated?

• We would establish a “Group Accident & Sickness” plan for

all employees or for any class of employees via a board

resolution.

• A “Group” is defined as 2 or more individuals.

• The corporation can then pay and deduct the premiums for

Critical Illness policies provided under this board resolution.

• The “Return of Premium” is a separate premium and it is

recommended this premium be paid for personally (if paid

corporately please seek the opinion of your Accountant).

• The Corporation would be the owners of the policies.

(note CRA has never ruled on the ROP feature of CI)

Critical

Illness

Insurance

Premium first 15 years

Corporately Owned

Client Age

Critical Illness

Tax-Free Benefit

Premium Payer

Premium Type

Annual

Premium

Total Premiums Paid After 15 years

Total Premiums

Refunded to Insured if Policy is

Terminated after 15

years

Joe 45 $250,000 Corp Basic $4,165 $62,475

Joe ROP $1,717 $25,755 $88,230

Jane 42 $250,000 Corp Basic $2,810 $42,150

Jane ROP $1,707 $25,605 $67,755

Critical

Illness

Insurance

Critical Illness Summary

• Over the next 15 years the principle would be insured for $250,000.

• If a full claim occurs the insured receives $250,000 tax free and the

policy ends.

• If the insured passes away during this 15 year period then the policy

ends and no premiums are refunded.

• If a full claim does not occur and the policy is terminated after 15

years then 100% of all premiums paid both Corporately and

Personally are refunded tax free to the executive.

• In this case the net cost of coverage for the 15 year period is

zero.

• As well the Corporation would’ve paid and deducted over

$155,000 in premiums that would now be transferred to the

insured on a tax free basis.

• Note this concept requires 2 insured lives.

Critical

Illness

Insurance

Next Steps

• While deciding upon amounts of coverage and how to

structure the plan, we should approach the Insurance

company to see if they are willing to underwrite the risk.

• We would recommend a carrier that has a full return of

premium after 15 years (some insurers have a minimum 20

year period).

• Applications will require completion and there also may be a

need for a paramedical exam, blood profile and/or urinalysis.

• There is no premium payable until a policy is issued and

accepted.

Critical

Illness

Insurance

Sample Resolution

to establish a Grouped Critical Illness Plan

The Company [XXXX name] has determined it’s in its best interests to provide supplementary

health benefits for certain classes [identify class of employee] of employees. It’s resolved that:

the Company establish a grouped critical illness insurance plan

the employees eligible to be included in this plan are [identify employees,

e.g. senior executives, senior managers, etc.]

the Company apply for individual critical illness insurance policies to insure those employees

for an insurance amount equal to [insert formula, e.g. 2 times annual salary.]

the Company will own and pay the premiums for the individual

critical illness insurance policies purchased under the plan

any benefits payable under the policies will be paid directly to the

insured employee by the insurance company, and

on termination of the plan or termination of the employee’s service, the Company will immediately assign

ownership of any policy that was purchased under the plan insuring that employee, to that insured

employee.

A motion was made by [name], seconded by [name] and after discussion,

the resolution was approved by a majority of the directors of the Company.

Sample Board Resolution