Long-term disability insurance and critical illness (CI) insurance are both types of living benefits insurance Canadians set up to protect themselves, their families and their financial assets in case of physical hardship. The two are easy to confuse, but they address different needs and hardly overlap. Here are some of the frequently asked questions about the two types of Living Benefits:
What exactly is Long-term Disability insurance?
Long-term disability insurance is designed to replace your income from employment or self-employment. It pays out a monthly benefit, typically a percentage of what you earned before becoming disabled. The benefits may last for a few years – and possibly until you’re ready to retire, if you can’t go back to your own job or any job.
What is Critical Illness insurance?
Critical Illness insurance is a product that pays out a tax free lump sum in the event that someone acquires a critical illness like cancer, heart attack or stroke, to name a few. The money can be used to travel to the U.S. or elsewhere for treatments, cut back at work, pay off debts, take a sabbatical, fund home care. It is flexible. If you stay healthy and have the right product, you can even get back every premium dollar.
What is the difference between Long Term Disability (LTD) Insurance vs. Critical Illness (CI) Insurance?
Which one is better for me: Long Term Disability Insurance or Critical Illness Insurance?
The answer is dependent on your personal life circumstances; statistics show that since more people are likely to get cancer, heart attacks or strokes – the major illnesses covered by CI – than to become and remain disabled for more than six months, CI tends to be a more popular product choice. If a Critical Illness occurs prematurely, the insurance benefit will be significant considering it was not funded for a long period of time – which is what this coverage is essentially for. If you live a full life, the option to have all premium dollars returned is there and can be incorporated into your retirement years.
To calculate the amount of critical illness insurance you might need, try out the free RBC Critical Illness Insurance calculator.