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Choosing Between Disability Insurance and Critical Illness Insurance

  • Published: 2010-08-22 (Revised/Updated 2013-06-16) : Author: Lorne Marr
  • Synopsis: Disability insurance or income-replacement insurance provides a monthly benefit if you ever should become disabled.

Disability insurance is also known as income-replacement insurance. It provides a monthly benefit to you if you ever in case you ever should become disabled, rendering you unable to operate in regular daily tasks. The disability is defined by the policy itself.

These are the usual 3 categories of disability insurance:

Any Occupation:

Total disability to perform any occupation occurs when you are unable to work at absolutely any occupation whatsoever. Thus, if you are working as a professional golfer, and your disability does not allow you to perform your standard work tasks, but you can still work as a helping force in a local depanneur - you will not see any money from your insurance company.

Regular Occupation:

Total disability under this definition means the inability to perform at one's ordinary occupation as a result of an illness or an injury.

Own Occupation:

This specific definition is the gold standard. Under this definition, total disability is one's inability to perform at one's habitual occupation regardless if one is working in another gainful position.

Ceteris paribus, the stricter the definition of disability, the more expensive the payment. Such terms are reasonable since the insurer is facing an increased likelihood of paying you your insurance claim.

As for Critical Illness insurance, it pays out in a lump sum if you are found to have a critical illness which is covered by the plan. Your insurance policy may cover as few as 3 to over two dozen critical illnesses. The definitions are similar among carriers, but it is a good idea to contact your broker who works with several carriers.

Another difference is that Critical Illness payouts aren't dependent on your ability to peform employment duties. Instead, the price is generally even for 10 years, the first 20 years, to age 75 or up to age 100. The longer the premium guarantee period, the higher the initial premium.

Lorne is a member of Advocis - The Financial Advisor's Association of Canada. Lorne has also been a keynote speaker at numerous industry functions and has appeared in The National Post, The Toronto Sun, the Investment Executive, The Advisor's Edge and the Insurance Journal. His commitment to providing clients with value-added service has made him an industry leader. Lorne is president of LSM Insurance ( - a Canadian Life Insurance company.

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