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Critical Illness – Blindness, Deafness, Loss of Limbs, Loss of Speech, Coma, Paralysis, Severe Burns

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This is part V of VII in our series of covered conditions on Critical Illness Insurance in Canada. In this article, we will cover specific physical conditions.

Blindness

Blindness is defined as a definite diagnosis of the total and irreversible loss of vision in both eyes, evidenced by:

  • the corrected visual acuity being 20/200 or less in both eyes; or,
  • the field of vision being less than 20 degrees in both eyes.

The diagnosis of Blindness must be made by a Specialist.

Note that while this condition would appear to be straightforward, the condition must be total and irreversible. If the condition is repairable or reversible, a benefit would not be paid.

Deafness

Deafness is defined as “a definite diagnosis of the total and irreversible loss of hearing in both ears, with an auditory threshold of 90 decibels or greater within the speech threshold of 500 to 3,000 hertz. The diagnosis of Deafness must be made by a Specialist.

Similiar to blindness, the loss of hearing must be complete and it must be irreversible. Hearing loss that is repairable is not a covered condition.

Loss of Limbs

A definite diagnosis of the complete severance of two or more limbs at or above the wrist or ankle joint as the result of an accident or medically required amputation. The diagnosis must be made by a specialist.

Of note with this covered condition is that you must lose TWO or more limbs. Loss of a single limb is not a covered condition.

The next two covered conditions are offered without commentary, if you’ve read this far you’re now aware that the contractual coverage of each condition requires careful reading and that simply contracting the condition is insufficient.

Paralysis

A definite diagnosis of the total loss of muscle function of two or more limbs as a result of injury or disease to the nerve supply of those limbs, for a period of at least 90 days following the precipitating event. The diagnosis of paralysis must be made by a specialist.

Coma

Coma is defined as “a definite diagnosis of a state of unconsciousness with no reaction to external stimuli or response to internal needs for a continuous period of at least 96 hours, and for which period the Glasgow coma score must be 4 or less. The diagnosis of Coma must be made by a Specialist.

Exclusion: No benefit will be payable under this condition for:

  • a medically induced coma; or,
  • a coma which results directly from alcohol or drug use; or,
  • a diagnosis of brain death.

Wrongful or criminal deception intended to result in financial or personal gain.

Also known as a “living benefit rider”, an accelerated death benefit is a rider that can be added to a life insurance policy. It allows the policy holder to access part of their policy death benefit if they have been diagnosed with a terminal illness. The funds are typically used for medical treatment and care.

Accidental death and dismemberment (AD&D) is a rider that can be added to a life insurance policy. AD&D issues a benefit if the insured person dies accidentally or suffers from dismemberment, such as the loss of a limb or the loss of use of a body part.

Accrued interest is interest that has been generated from a life insurance policy but that has not yet been paid out to the policy holder.

Actual age is a method that life insurance providers use to calculate the age of a life insurance applicant. Using this method, your age is determined by your most recent birthday. Another method used is “nearest age”, which determines your age based on whatever birthday is closest to the present date.

Actuarial tables are vital to life insurance companies. Sometimes known as mortality tables, they indicate the statistical probability of death of people based on factors like life expectancy, age, gender, health, and more.

An administrative expense refers to a business expense that is not part of the company’s main operations, such as production and sales. Administration expenses include things like salaries, benefits, insurance, etc.

Adverse selection refers to when sellers and buyers do not have the same information, such as a salesperson knowing the value of a product is less than its cost. In life insurance, adverse selection can include when an applicant does not disclose relevant information to the insurance provider.

A life insurance agent is responsible for selling life insurance policies to people and working with clients to process life insurance claims. In contrast to a life insurance broker, an agent works on behalf of a life insurance company.

When naming a beneficiary for a life insurance policy, there is typically a primary beneficiary and an alternate (or contingent) beneficiary. An alternate beneficiary is the person who receives the policy’s death benefit if the primary beneficiary is unable to claim it.

Annual renewable term (ART) life insurance is a form of term life insurance that offers one-year coverage that can be renewed every year. Because premiums increase with every annual renewal, ART life insurance is best for short-term coverage needs.

An annuity is a financial strategy offered by banks and insurance companies that invests a customer’s money in order to generate an income stream down the line. Annuities are most commonly used to bolster retirement funds.

In the context of life insurance, an applicant is the person applying for life insurance coverage.

A life insurance assignment enables a policy holder to transfer control of their life insurance policy to a third party—typically a close relative.

An Attending Physician Statement (APS) is a document issued by life insurance companies that must be filled in by a physician, providing an overview of a life insurance applicant’s health and medical history.

An automatic premium loan is primarily associated with permanent life insurance policies with a cash value. It enables life insurance providers to deduct any outstanding premiums from the policy’s cash value.

On life insurance applications, you may come across the term avocation. An avocation is simply a hobby, or an activity outside of work that you participate in. Certain avocations can influence your life insurance premium rates.

Backdating is a strategy life insurance applicants can use to lower their premiums with life insurance companies that use your nearest birthday to determine your age. If you are 29.5 years old, you can use backdating to secure a premium for a 29-year-old. You just have to pay premiums for the months that elapsed from your insurance age being 29.

A beneficiary is the person (or entity) that is named on a life insurance policy that will receive the death benefit when the insured dies. Typically, a beneficiary is a spouse, dependent or close relative, though organizations can also be named as beneficiaries.

Burial insurance, also known as final expense insurance, is a type of whole life insurance policy with a modest benefit (usually under $25,000) that is intended to cover funeral and burial costs.

Capital gains tax is a tax paid on the profit generated when an investment is sold. If you terminate a permanent life insurance policy, you will pay capital gains on any income exceeding the policy’s adjusted cost base.

If you terminate a permanent life insurance policy after a set period of time, the life insurance provider will pay you a sum of money, the cash surrender value. This amount is the cash value of the life insurance policy minus any surrender and administration fees.

Cash value life insurance refers to a type of permanent life insurance that comes with a cash value. The cash value increases over time as the policy holder pays into their policy and can be used as collateral for loans or to cover premiums.

A child protection rider can be added to a term life insurance policy to extend coverage to your child or children. With a child protection rider, the policy holder will receive a small death benefit should their child die within the coverage period.

In the context of life insurance, a claim is a request submitted by a beneficiary to the insurance provider when the insured dies to release the death benefit. Essential documents required for a life insurance claim are a death certificate, policy document, and claim form.

A collateral assignment is when a policy holder appoints a third party (usually a lender) as the primary beneficiary of their permanent life insurance policy in order to take out a loan.

In the life insurance industry, company ratings are carried out by independent groups and rank insurance providers based on their financial health. AM Best is one of the most popular online companies for life insurance company ratings.

Concealment refers to when a life insurance applicant does not divulge important information to the life insurance provider, including smoking status, health, avocations, and more. Concealment can lead to a terminated or voided life insurance policy.

A contestability period is a fraud-management clause in life insurance policies. It consists of a one or two-year period in which life insurance companies can review your coverage and deny potential claims.

A contingent beneficiary, also known as alternate beneficiary, is the person or entity who inherits a life insurance policy death benefit if the primary beneficiary can not longer claim it.

Conversion right, sometimes called conversion privilege, is a clause in group life insurance policies that lets the insured switch to an individual life insurance policy without having to undergo a medical exam and underwriting.

A convertible life insurance policy is a type of term life insurance that allows the policy holder to convert their coverage to a permanent life insurance policy without having to apply for a new policy.

In life insurance, coverage refers to the size of a policy. In other words, how much the death benefit is worth. A life insurance policy with $150,000 in coverage will issue a $150,000 death benefit if the insured dies within the coverage period.

A critical illness rider is an optional add-on for life insurance policies that pays out a tax-free lump sum if the insured is diagnosed with or suffers from a covered critical illness, such as a stroke or heart attack.


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