# Disability & Critical Illness Insurance - yay or nay?



## Young&Ambitious (Aug 11, 2010)

I'm looking into getting disability & critical illness insurance but am not sure whether it's worthwhile or not.

Some background info: early 20's, female, self-employed non-dangerous work in accounting (the worst I can do is likely staple myself), no dependant (legally the dog isn't recognized), income to increase over the next 5 yrs substantively due to education+experience+designation gains, and I don't participate in "dangerous" activities.

I've been recommended to a broker who works for a credit union and have received the quote. And I guess now I want to my own independent homework and see if it's worthwhile....

Please give me your advice and comments!


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## ChrisR (Jul 13, 2009)

I don't usually argue in favor of extra insurance, but disability and critical illness insurance seem to be a very good idea. What would you do if you suddenly lost your ability to work?

As you're young, I expect that insurance should be quite affordable. Its still a good idea to get a second quote however!

(I assume since you're self-employed with no dependents that you don't have life insurance. If you do have life insurance, make sure you check to see if it includes a critical illness clause, which could make critical illness insurance unnecessary).


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## Cal (Jun 17, 2009)

You have to remember that you aren't necessarily insuring against an on the job injury. There are lots of what if's that could happen.

I somehow got abdominal pain last year, and discovered out I had 2 hernia's (yay me) and required surgery.

I already had disability insurance, but it did make me revisit my level of disability coverage.


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## MoreMiles (Apr 20, 2011)

Have you heard of any 20 year old being diagnosed with multiple sclerosis or diabetes? If anyone is unlucky enough to have such horrible diagnosis, that person becomes uninsurable, no matter how much premium you are willing to pay. Most insurance companies are very picky, they refuse any applicant with HIV, cancer, MS, diabetes, list goes on and on. You may simply have a look at their screening medical questionnaire with the application. If a person lies during the application, the contract is void many many years later when a claim is needed. So there is really no way to hide.

So my advice is to buy all your future need insurance NOW while you are still very healthy. Many people don't think about insurance until they have children or get ill...


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## andrewf (Mar 1, 2010)

Mind sharing your quote? I'm curious how much it costs.


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## Henry (Jul 12, 2009)

Have you thought about combining term life with critical illness and disability insurance?

Since your future is very bright with very high income, have you thought about starting a whole life policy while it is cheaper to insure?


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## Cal (Jun 17, 2009)

MoreMiles said:


> Have you heard of any 20 year old being diagnosed with multiple sclerosis or diabetes? If anyone is unlucky enough to have such horrible diagnosis, that person becomes uninsurable, no matter how much premium you are willing to pay. Most insurance companies are very picky, they refuse any applicant with HIV, cancer, MS, diabetes, list goes on and on. You may simply have a look at their screening medical questionnaire with the application. If a person lies during the application, the contract is void many many years later when a claim is needed. So there is really no way to hide.
> 
> So my advice is to buy all your future need insurance NOW while you are still very healthy. Many people don't think about insurance until they have children or get ill...


Good Advice. As if you wait a few years and get an injury or something, the insurance company will cover you, however they will exclude anything related to the previous injury.

Best to get the coverage while you are still healthy. And don't lie on the questionaire. They will send out a healthcare practitioner to take a blood and urine sample too. 

As much as I dislike how the insurance salespeople use fear to make you buy a good plan. I have known someone who got cancer as a non smoker in their 20's. So you never really know what your future holds.


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## the-royal-mail (Dec 11, 2009)

I'm not a fan of this type of insurance. Some people may think "it's a good idea" or "just to be safe" but I wonder if those same people have had to collect from this type of plan. What makes the co. good is not how friendly their salespeople are but how friendly they will be when you have to make a claim. I know several people who have been through it and they have found it to be a very invasive process. Above all, ins. companies are there to MAKE MONEY and will be glad to deny your claim to keep a healthy bottom line for themselves. I am not saying they all do this, but again, talk to people who have actually been through the claims process rather than those who simply say "it's a good idea". There is quite a difference in what you will hear from each side.


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## cash (Mar 5, 2011)

I'm in a similar situation to OP. A good reason to buy this insurance when you're young is to get a better price. If you sign up in your 20's you will have a low premium and depending where you buy from you can lock in your rate, and it will only be indexed to inflation. Once in your 30's or older the price begins to go up. 

I got a quote through a local credit union, and they would sell it for about $1000/yr with up to 50% of premiums being returned every time you go a few years without filing a claim. I got another quote through my professional organization that was $350/year with no money returned if you don't make a claim. 

Suze Orman and Gail Vaz Oxlade are both proponents of disability insurance.


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## Henry (Jul 12, 2009)

cash: If the quote you got from your professional association covers everything that the credit union covered, then 350 is a really good deal. I think the reason that the professional association quote being cheaper is that it might be a group plan and there is no commissions involved. 

What does 350 include? Disability or disability and critical illness?

If you enjoy a high salary, then I believe 350 annually is a reasonable price for such insurance.

Again, you might want to look into a combined term, critical illness, and disability insurance.


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## cash (Mar 5, 2011)

They were somewhat similar quotes, however the credit union wants me to work for 1 more year (2 total) before they will insure me as I don't yet have a long enough earnings history. The prof. assoc. will ensure me right now as I have 1 tax return that I'm just doing now. I haven't bought anything yet, because I'm just at the 1 year mark right now.

Neither has critical illness, and both will provide about $3,500/month after 90 days. The prof. assoc. will not lock in their rate however and they will increase as I get older. 

I think it's good value and I'm going to sign up as soon as I get a bit of spare time.


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## Henry (Jul 12, 2009)

cash:

If the prof assoc is not willing to lock in the rate or at least lock the potential rate increase (like max of 3%) a year, then I think that can be a source of risk.

Also you need to read the fine print. There are different type of disability insurance. Some policies only pay if you can not work any jobs. Some policies pay if you are no longer able to work your profession. This is a difficult field to navigate. I would make sure I understand what I am getting before I make a commitment. 

Maybe you can look around for combined term, disability, and critical illness. Also get a few quotes from a broker, who can shop around for you.


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## cash (Mar 5, 2011)

Why do I need term and critical illness insurance?


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## the-royal-mail (Dec 11, 2009)

I hope anyone contemplating this understands that what henry says is absolutely true: this is a difficult field to navigate. Collecting from this type of insurance can be an ongoing minefield. Unfortunately, the OP may not know enough about this process to know what questions to ask. Best to talk to people who have tried submitting claims to be sure you understand what you are and are not getting with your premium. This is quite a bit of cash outlay. Highly recommended to research extensively.


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## Young&Ambitious (Aug 11, 2010)

Thanks for all the input thusfar!

I was under the impression that as I have no dependants that life insurance is a relatively unnecessary expense at this point in time...

What organizations would you guys recommend or alternatively NOT recommend as insurance providers?

The quote I got is through Canada Life for $973 annually and while I want to re-confirm it seems that this price is locked in.

Oh and another point is that I am unincorporated but when I do move to do this I would definitely be considering doing a plan under my business however I would be the sole employee of this corporation... I imagine that would change things up a bit?


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## cash (Mar 5, 2011)

I believe it needs to be registered to your own name and paid for with after tax dollars. This will protect the tax free status of payouts.


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## MoneyGal (Apr 24, 2009)

Hmmm. You don't need to insure a future income stream if there is no one depending on that income stream.

I am not sure that "buy it now because it is cheaper now than it would be when you are older and/or have a genuine need for this product" is really a compelling argument. 

All insurance, whether life, disability or critical illness (the latter also colloquially known as "jump the queue insurance"), is priced according to the risk for the cohort into which the insured person is placed. 

Life/disability/critical illness insurance is cheaper when you are younger because the risk of payout is lower. So if you have a legitimate need to insure a future income stream, buying when you are younger will be "cheaper" than when you are older, all things considered. But if you have no real need for the product, buying at a younger age to secure a lower yearly premium isn't really a bargain. [scratches head]


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## Young&Ambitious (Aug 11, 2010)

Thanks MoneyGal. 

But to confirm, securing an income stream for myself in the instance of injury/illness/accident etc does make sense regardless of my age....


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## cash (Mar 5, 2011)

http://www.gailvazoxlade.com/articles/just_in_case/disability_insurance.html

http://gailvazoxlade.com/blog/archives/295

http://gailvazoxlade.com/blog/archives/2713


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## Young&Ambitious (Aug 11, 2010)

Thanks Cash! Those articles make some really points on different features available. I will have to ask my broker about those 

I'm also looking into Private/Personal Health Services Plan, which seems to only be in regards to medical/dental. Sounds interesting although it caps off at $1, 500 to be deducted as a business expense however I suppose the rest could then be deducted as a personal medical expense... Now to find a suitable plan. Whew this insurance stuff takes some time!


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## MoneyGal (Apr 24, 2009)

Ack! I should have distinguished between life and disability insurance.


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