Critical illness vs. disability insurance
By Rob Lamberti, AdvocateDaily.com Contributor
There are significant differences between critical illness insurance and disability insurance, but both can provide substantial financial protection for lawyers and their firms, says Dawn Marchand, vice-president of marketing and direct distribution for CBIA/Lawyers Financial.
Critical insurance coverage offers a one-time disbursement if the person covered is diagnosed with one of the serious illnesses listed in the policy and survives a specified waiting period, which is usually 30 days, Marchand tells AdvocateDaily.com.
"It's a one-time payment and it's tax-free," she says.
While most policies cover nearly two dozen conditions, about 80 per cent of claims involve heart attacks, stroke and life-threatening cancers, Marchand says.
Critical insurance allows a person to continue working and collect on the policy, says Marchand.
"You probably don't need as much critical illness coverage, but it's good to have — just in case something happens and you have to retrofit your home, for example," she says.
Money from a critical illness plan could also cover expenses for trips to seek a second opinion or to support a caregiver.
“The good news is more people are surviving critical illnesses,” says Marchand. “But the last thing one needs is a financial strain."
Disability insurance provides coverage for a loss in personal employment income as a result of a serious illness or accident, she explains.
"It's meant as an income replacement. It's an ongoing, monthly payment based on a percentage of your income, depending on the coverage chosen in the policy," Marchand says.
"It's paid as long as you're unable to work until the time that is stated in your policy," she says. "For example, some are payable until the age of 65, or 71. Benefits can also be paid for a total or partial disability. Basically, it's coverage to protect your income."
Marchand says the insurance products offered by CIBA/Lawyers Financial are available only to lawyers and the legal community.
"There are many lawyers who run solo or small practices and don't have this type of insurance and I would suggest disability coverage is the most important policy they need to consider," she says. "It’s vital to protect your income because your family is relying on you, and you likely have car and house payments. Your income is the most important thing to protect."
Marchand says individuals should review their insurance coverage, even if they have group benefits.
"Quite often group benefits are not enough,” she says. “You can buy individual coverage as a top-up to the group plan to protect as much of your income as you need to."
Marchand says business expense insurance is also available to cover the operational costs of the practice.
"If you’re a solo or small firm, you could get up to $30,000 a month to keep the lights on and your practice running," she says. "It will cover items like utilities and salaries. It will even cover the cost if you have to hire a lawyer to run your firm while you're not able to."
"What's unique about our product is we pay 100 per cent of your monthly costs for the first 12 months without any proof of expenses," Marchand says. "This is usually a reimbursement product, but our plan pays monthly benefits for a year without documentation and thereafter, the benefits are equal to actual expenses."
She urges people to plan insurance coverage for the present and the future — since a lawyer's salary will likely increase over time.
"When you first purchase disability coverage, you'll be offered a Future Increase Option (FIO) because for very little money it will allow you to increase coverage every year or two without undergoing a medical examination," Marchand says, adding that the increases are determined by the policy.
She also suggests adding the Own Occupation Rider to their disability insurance policy.
Insurance companies often limit disability coverage to two years before urging policyholders to return to work. If one can't return to the legal profession, the insurance provider could tell the client to work in another field, such as teaching. If a person can work at another job, coverage may be withdrawn, Marchand explains.
"CBIA policies with an Own Occupation Rider will say your disability will be paid for as long as you cannot do your job as a lawyer," she says. "This product is for lawyers, so if you can't do what you were doing before you were disabled, you will continue to receive your benefits."
Marchand urges anyone considering insurance to speak with an advisor to discuss their full range of policies.
"I truly believe disability insurance is something one needs to talk to an advisor about to see what their overall insurance package should look like," she says.
"You're protecting your income and your livelihood here," Marchand says.