Often, we wait too long to review our insurance needs and make changes. I was talking with a woman recently whose husband had a heart attack and she told me they hadn’t looked at their coverage in 25 years – oops! So what’s the difference between critical illness insurance and long-term disability insurance? And do you need both?

While there are similarities between the two types of coverage, each one looks after entirely different needs, and each is appropriate for the needs it was designed to address.

Long-term disability insurance (LTD) usually pays a regular monthly benefit to a person who can’t work because they’re suffering from a disability. Most people have long-term disablity coverage through their employer’s group benefits. The amount of the monthly benefit is typically a percentage (often 67 per cent) of the person’s monthly income before they became disabled. Before benefits can be paid, a doctor’s diagnosis must confirm the disability and the individual must complete the waiting period, typically 120 days from the onset of the disability. For example, it’s very likely that in the case of a mild heart attack, a person may never satisfy the waiting period and therefore may never receive any benefits.

Critical illness (CI) insurance pays a one-time lump sum benefit to a person suffering from one of the 24 critical illnesses covered under the policy. These illnesses include cancer, heart attack, stroke, Alzheimer’s disease, Parkinson’s disease and multiple sclerosis. As is the case with long-term disablity, before benefits are payable, a doctor’s diagnosis must confirm the condition, and the individual must complete the survival period, usually 30 days from the diagnosis. No disability, permanent or otherwise, is required to qualify for a critical illness benefit.

The advantage of a critical illness insurance policy is that it provides cash up front, to be used for anything that the individual chooses. The uses can range from paying for indirect expenses related to the illness, pursuing treatments and therapies not covered by our health care system or making modifications to a house to deal with the illness.
The website criticalillnessplans.com has plenty of information about the risks and costs associated with critical illness insurance and in particular, the advantages for women.
To make things a little easier to understand about critical illness and long-term disability insurance, the chart below offers a snapshot of some key differences.

So if you haven’t considered critical illness insurance, I suggest you call your financial advisor for more information. There’s no time like the present to do a review and make sure you have all your insurance bases covered.

Long-term Disability		Critical Illness
Can replace a portion of your lost income.		Can pay a lump sum to be used as you choose.
Require ongoing proof of loss of income to continue receiving payments.		No ongoing proof is needed.
Benefits stop once income is earned.		Benefits arn't affected by other income.
Benefits are limited to a percentage of pre-disability income.		Benefits are the full amount of the policy.