So far on the Bulletin Board we’ve spoken about life insurance and death benefits, but what were to happen if you were to become critically ill or if you were unable to work for a period of time? Living benefits are just as important as death benefits. Critical Illness insurance and Long Term Disability insurance makeup the living benefits coverage that is a crucial part of the insurance you and your family need. So, what are the differences? And do you really need both or is one more important than the other?
Critical Illness Insurance
Critical Illness insurance is a living benefit that is paid out to you in the case that you fall ill with a critical illness such as cancer, heart attack, a stroke etc. This living benefit is a large amount, dependent on your chosen plan of course, and is paid in a lump sum. Your CI benefit can be spent on anything you wish – medical care not covered by OHIP or your private coverage, to supplement your income, to cover living costs such as your mortgage and bill, or even on travel. There is typically a waiting period from the time you apply for the benefit till the time you receive it, but otherwise you receive the one-time payout and can use it as you see fit.
Long Term Disability Insurance
Disability insurance is an income supplementing living benefit. This means that if you suffer an injury or become ill in a way that prevents you from doing your job for a period of time – you could receive a Long Term Disability (LTD) insurance payout. LTD benefits are calculated based on your income and are paid out on a regular and ongoing basis. Your LTD benefits are typically a percentage of your total income, not your entire salary, and are hugely beneficial in paying off your large monthly costs such as your mortgage payments. Unlike the Critical Illness insurance benefit, LTD benefits do require that your condition is monitored and assessed regularly to gauge when you are fit to return to employment and when your benefits will no longer be paid out.
Which Living Benefit Plan is More Important?
The truth is that these two living benefits plans go hand in hand; they do not cancel each other out. LTD insurance is considered your base, the foundation of living benefits. If you are to fall ill or suffer an injury or disability, LTD is critical in replacing income lost. LTD could quite literally keep the roof over yours and your family’s heads. And while LTD is the foundation of your living benefits plan, Critical Illness insurance is often described as ‘filling in the gaps.’ If you or your loved one were to suddenly be diagnosed with a critical illness, you might be faced with expenses and concerns much larger than a portion of your old salary could cover. Or to put it another way; LTD will keep you afloat in your life raft till you reach the shore, while Critical Illness insurance will provide you with fresh water and oars to help fill in the gaps. Neither is much good without the other.