Critical Illness Insurance The Non-Disclosure Problem
Critical illness insurance is a type of life insurance coverage that pays out a lump sum benefit when the policy holder becomes seriously ill or disabled due to disease or injury. It’s designed as a financial protection for some very specific medical situations. Insurance companies underwrite these policies and charge premiums accordingly, but they don’t have to disclose their rates.
That means most people are unaware just how expensive critical illness insurance can be and end up overpaying for it by unknowingly passing on pricey life insurance rates without realizing it. Insurance companies love to do this because they know once the customer has committed to buying, the client will never even realize he overpaid in the first place.
This is a very common problem in the insurance industry, where companies tend keep their rates hidden unless brought out into the open. This is why we need a site like Advocacy.ca to help consumers protect themselves from this kind of deception and overcharging from insurance companies.
We've done the work to find out just how much you can actually end up paying in critical illness insurance premiums .
In order to calculate the average cost of critical illness insurance, we looked at the current average annual premium rates for AARP Term Life, linked below, which has been the most popular life insurance product on the market for decades. The data below is from a couple years ago but it's still very accurate today.
Year Selected House Policy Premium Maximum Value of Max Value Death Benefit Annual Premium Rate 2010 AARP Term Life $110,000 $1 million $35,000 $879.20 2011 AARP Term Life $135,000 $1 million $50,000 $632.80 2012 AARP Term Life $147,000 $1 million $55,000 $569.80 2013 AARP Term Life $159,000 $1 million $75,000
$399.20
$594.80
2014 AARP Term Life
•$159,000 to $195,000 •1 million to 1.25 million •150% of max value •20% of last year's premium •$600 per month X 13 months = $8,760 per year 2014 AARP Term Life
•$159,000 to 195,000 •125% of max value •15% of last year's premium •+2.5% of the current premium •$600 per month X 13 months = $8,760 per year
These rates will vary from province to province. By law, insurance companies must justify any outrageous rate increases to the regulatory agency in your province but only after you’ve already bought it and are paying for it.
If you're concerned about life insurance rates, I highly recommend you use an online price comparison site like Advocacy.ca to compare online quotes from various life insurance companies and ensure you’re not overpaying for your policy.
Make sure you shop for a policy that has a larger face value and will protect your family's future, instead of buying the most expensive policy you can afford. You want to buy the right kind of life insurance for your needs.
For example, if you have a house, you really only need an insurance policy with a $1 million face value, while if you have no home and can't hold on to any capital in case something bad happens to yourself and your family, then maybe putting $150K or $200K into an insurance policy may be more beneficial. The size of your benefit is only half of what drives how much it ends up costing at maturity versus death.
As an example, policies with a $1 million face value have a 20% mortality rate and are very expensive. However, if you only have a $150K or $200K policy, the mortality rate on that policy is only 5%. The difference in rates can mean tens of thousands of dollars in premiums. So be sure to shop around and compare no matter what the face value of your policy is.
Also be aware that some insurance companies will vary their rates every year. Some charge more than others for no reason or because they want to increase your premium even when you're not sick or disabled. Other insurance companies charge more for higher risk policies and lower for lower risk policies.
I recommend you always shop around and compare the best deals in your province to ensure you’re not getting gouged. If you find an insurance company who charges way less than their competitors, ask them why. That way you can compare yourself to their rates and make sure your insurer is giving you a good deal on the policy, which will save you money in the long run.
There's no doubt that life insurance rates can weigh heavily on many people’s minds, but they don't have to be so scary.
As long as they stick to their budget when it comes to life insurance premiums, just like most people do with any financial plan, they shouldn't have a hard time managing those rates.
If you have any questions about life insurance rates or the best ways to compare deals, check out my guide on that topic here:
1. How Much Life Insurance Should I Buy? Get My Recommendation For You On Your Next Policy Quote »
2. It's All About "Risk-Based Pricing" - Don't Get Scammed By Life Insurance Companies » 3. Don't Buy A Low-Rated Life Insurance Policy In Case Of A Disability - Save Money & Protect Your Family With The Right Coverage » 4. Get The Best Life Insurance Rates For A Small Premium Rate (And Higher Mortality Rate) « 5. How Much Does Critical Illness Insurance Cost? » 6. Can I Afford Life Insurance? Get My Recommendation For You On Your Next Policy Quote » 7. The Most Important Thing You Can Do About Life Insurance Rates Is This » 8. Where Should I Buy Life Insurance? Get My Recommendation For You On Your Next Policy Quote » 9. Which Online Bank Is The Best To Get Term Life Insurance From? » 10. Where Can I Buy Cheap Term Life Insurance On The Internet? Get My Recommendation For You On Your Next Policy Quote 11. What's The Difference Between Whole & Universal Life Insurance Policies (And Which Is Best)?
12. How Much Does Term Life Insurance Cost For A 50 Year Old Man, 20 Year Old Woman And 15 Year Old Child?
13. How Is A Term Life Insurance Policy Different From Whole And Guaranteed Universal Life?
14. What Are The Best Reasons To Buy Whole Life Insurance?
15. What Is Term Life Insurance And Why Do You Need It? 16. How Much Does Term Life Cost For A 50-Year-Old Man, 20-Year-Old Woman and 15-Year Old Child (With Pediatric Dental)? 17. I'm 37 Years Old - Am I Too Young To Buy Life Insurance? What's The Cheapest Plan For A Single Parent With 2 Children Under 5? 18. My Husband Is On Disability - When Should We Buy Disability Insurance And How Much Do We Need Besides Our Term Life? 19.
Conclusion
The role of life insurance for your family is essential. It's often described as the foundation for their financial plan. The money you leave your loved ones can help supplement their retirement income or be used to pay off debts, such as a mortgage or car loan.
However, it’s important to choose the right kind of insurance and not overpay for it. That way the money you leave behind will help your family after you’re gone without draining all of their savings in the process. While term life insurance is cheaper than whole life, there’s no denying that it has some benefits to consider.