Selling Critical Illness Insurance? Critical Illness Insurance 101 is for you
The Coverage Many Clients Can't Afford to Live Without
What has a more affordable premium than individual disability insurance, is perfect for spouses of high wage earners, and allows the insured to receive a lump sum benefit to use as needed – no strings attached?
If you guessed Critical Illness, you're more enlightened than most. In the quest to offer a variety of clients asset protection, Critical Illness insurance is an important solution to have in your tool belt. It's a big differentiator too, since many producers don't offer this valuable coverage.
Below you'll find everything you need to know to serve clients better and build your income by adding Critical Illness to your product suite.
What is Critical Illness insurance?
Critical Illness insurance provides financial protection when a major illness occurs and a person is unable to work and earn an income. This medical insurance helps cover medical expenses that are typically not covered by other insurance policies. Paid in lump sums, Critical Illness insurance gives clients the freedom to use the money where it is needed most - from medical bills to the mortgage.
This coverage comes into play as traditional health insurance leaves consumers with more and more gaps in their coverage. As a result of high deductibles, coinsurance and limited coverage on nontraditional treatments, individuals may incur large medical bills that are not covered by their traditional insurance policy.
Critical Illness insurance works by paying for expenses that result from a long-term recovery from a covered illness. It does not pay for each medical bill, but instead provides a payment that can be used toward any condition listed on the policy.
Who is Critical Illness insurance best suited for?
Critical Illness is best suited for:
- Spouses of high wage earners - if a doctor, lawyer or executive has to spend time away from work to care for a sick spouse, the business suffers. If the spouse has critical illness coverage, the family can immediately afford to hire in-home care, a nanny or other service providers to keep the home running smoothly.
- Self employed clients and other high wage earners who have capped out their DI limits.
- People in high-risk jobs often do not qualify for disability insurance. However, those occupations - such as firefighters, long-haul truck drivers or police officers – may qualify for critical illness insurance.
- Anyone who is concerned about not having an adequate income to absorb the critical illness costs not covered by traditional insurance.
Is Critical Illness insurance sold in addition to DI or instead of DI?
Disability insurance, sometimes referred to as "income replacement" insurance, provides a monthly payment if a person becomes disabled and can no longer work. DI policies pay a monthly income during a predetermined period that the insured is unable to work. In general, DI benefits are limited to a percentage of the insured's regular income and stops once the disabled person is able to earn an income or he no longer meets the definition of disability as described in the policy. Disability policies often have a waiting period from the onset of disability. Also, unlike critical illness benefits, disability benefits may be affected by any other income the insured receives.
Critical Illness insurance differs from DI in that it covers the costs related to recovery from major illnesses. Critical illness policies pay a set amount to the insured or beneficiary when a qualified event happens. Critical illness insurance provides the full policy benefit in a lump sum payment on diagnosis of a critical illness. Because each policy offers different protections, it is beneficial for insurance brokers to sell both types of coverage. In many cases, it's advantageous to optimize protection by selling the two products together.
What are the key selling features and benefits of Critical Illness insurance?
Coverage features vary by product so make sure you're familiar with the product you're selling. Most Critical Illness policies include the following key coverage features:
- Paid Expenses: Long-term recovery from an illness often includes many unexpected expenses. Critical Illness insurance fills the gaps so a person is not overwhelmed by medical bills.
- Guaranteed Renewable: As long as premiums are paid on time, the right to renew Critical Illness insurance policy is guaranteed, which provides peace of mind to clients.
- Lump Sum Benefit: If diagnosed with one of the covered conditions, a lump sum benefit is paid out to the insured. This payment then can be used for any condition that is listed on his policy. What the insured does with the benefit is up to him. He could use the money to pay medical bills, to cover his mortgage or to pay utilities. With the lump sum payment, the insured could even pursue alternative care or hire a healthcare worker.
- Benefits Paid Directly to Client: Critical Illness insurance pays the insured directly, in addition to all other insurance coverages he may have; which gives the client control of how the funds will be used. In this way, Critical Illness insurance bridges the gap between a traditional health insurance policy and the actual expenses incurred.
- Flexible Coverage Options: In some cases, clients can choose to have a policy paid up in 20 years or have premiums returned after 15 years, thus the flexibility clients need and demand.