Ah, the “Golden Years”…. your clients have worked hard all of their lives and have looked forward to retiring and enjoying these relaxing times. The life insurance is in place to pass on to their surviving loved ones, their final expenses are taken care of, and they have health insurance. This is a perfect scenario.
Now it’s time to for a dose of reality. What happens if a client is diagnosed with a critical illness, such as cancer, heart attack or stroke? Are they prepared to cover the out-of-pocket costs? Ask yourself the following questions about with a specific senior client in mind:
- What costs will they be responsible for with their health insurance plan (deductible and co-insurance)?
- Will they need to travel for medical treatments?
- What if they need extended convalescence?
- Will they require help from family members?
- Where will the money come from to pay these extra expenses?
This article provides information on how to cover these expenses if your clients are diagnosed with a critical illness and protect your hard-earned nest egg. Even with a great retirement health plan or Medicare coverage senior clients are going to incur certain expenses that are not covered by these plans. Critical Illness insurance will help with these expenses and protect your savings.
What Are Critical Illness Plans?
Critical illness plans, also known as “Living Benefit plans” provides a cash benefit that will help pay the bills, will help maintain their lifestyle, and provide peace of mind if they are diagnosed with a critical illness. The health coverage or Medicare plan they have will pay the doctors and hospitals, and critical illness benefits can be used to cover the out-of-pocket expenses that are not covered by those traditional health plans.
The cash benefit can be used for:
- Deductible and Co-Insurance on your Health Insurance Plan
- Prescription Drugs
- Travel Expenses
- Extended Convalescence
- Car Payment
- Treatments Not Covered by Traditional Health Insurance
You will find two types of plans, one pays a lump sum cash benefit when clients are diagnosed with a covered condition and the other, an indemnity plan, pays a cash benefit per each covered service received. The key here is that the benefit is paid directly to the patient!
The lump sum plan generally pays a cash benefit one time and then the policy terminates. The indemnity plan will continue to pay benefits and stay in force as long as the premiums are paid.
Why Do Seniors Need a Critical Illness Plan?
Did you know that individuals are more likely to survive a critical event due to today’s modern technology? And due to the high cost of that technology care is increasingly expensive.
While advances in medical science have significantly improved our chances of surviving heart attack, cancer, stroke or other critical illness, the fact remains that 75% of healthy individuals over age 40 will become critically ill at some time in the future, according to the American Heart Association.
Do you know the odds of being diagnosed with a critical illness after age 65?
People over age 65 account for 60% of newly diagnosed malignancies. The incidence of cancer in those over age 65 is 10 times greater than in those younger than 65, according to the American Cancer Society and the Centers for Disease Control.
Seniors can face much higher bills if they develop a chronic disease such as cancer, which is almost 10 times as likely among adults over 50 and can cost more than $40,000 to treat, according to the Courier Journal.com .
Others are forced into bankruptcy. Nationally the percentage of filers who are 55 and older rose from 8 percent in 1991 to 22 percent in 2008 – from 97,784 to 225,483 petitioners. Researchers say medical debt accounts for half of the nation’s bankruptcies, according to Courier Journal.
Seniors and Bankruptcy
The bankruptcy rates among seniors are growing at an alarming rate. According to the AARP, from 1991 to 2007, the rate of personal bankruptcy filings among those ages 65 or older increased by 150%. The largest increase occurred among those ages 75 to 84, soaring at a rate of 433%.
Experts say that there are several reasons behind this trend. Medical and prescription bills play a major role in the debt, along with credit card debt. Inflation has risen dramatically, but, unfortunately, pensions and retirement incomes have not. We are expected to live longer, so seniors are outliving their savings. In previous decades Social Security helped older Americans into the middle class, but that is not true today.
Changes in the Insurance Industry and Critical Illness Plans
We are now seeing plans available for people age 0 to 85! Quite a change is taking place and with the insurance companies seeing the value and NEED for this type of coverage, they are making more products available.
The largest change we have seen with insurance companies is to accept people that have had cancer, heart attack or some event that would have disqualified them from coverage in the past. Some companies have a five-year look back period. This means that if individuals had an event longer than five years ago, they will qualify for coverage, in most cases.
Each company and their specific plan need to be reviewed to determine the qualifications individuals must meet for coverage.
Obtain a Plan that Does Not Terminate at Any Age
This varies by policy and needs to be reviewed carefully. Some plans will reduce the benefit by 50% at age 65, 70 or 75 and they could possibly terminate at a specific age. If purchasing this coverage to protect a savings account, then individuals would want a plan that will not terminate at ANY age. There are companies that offer the opportunity to purchase this coverage through age 85 with no age termination clause.
Life Insurance with Living Benefits
These plans are relatively new to the marketplace. This is a life insurance plan, term life or universal life, and it includes coverage for critical illness, chronic illness and terminal illness. The individual then has four plans for just one price.
The critical illness benefit is paid if the client is diagnosed with a covered condition. This is how the benefit is determined and how it is paid. When a claim is filed, the insurance company takes into account the severity of the condition, how long the individual has had the policy, and how long they are expected to survive. They use these factors to calculate a maximum benefit they will offer. The client may take a portion of that amount or all of it. If an amount equal to the death benefit is taken, the policy terminates. If they choose to take just a portion of the offer, then it is deducted from the total death benefit. Then the policy stays in effect with a lower death benefit, and at a lower premium.
The terminal illness benefit varies by company but generally will pay a lump sum benefit when diagnosed with a covered condition AND have less than 12 months to live.
A client qualifies for the chronic illness benefit by not being able to perform two of the activities of daily living, which are: personal hygiene, dressing and undressing, self-feeding, functional transfers, bowel and bladder management, and ambulation. This benefit is paid on a monthly basis for a maximum period (generally 45 months). Please check any plan for specifics related to benefit payouts and waiting periods.
This could be accelerated as many times as conditions dictate and the balance is left as the death benefit. This type of plan is very good if the client is in need of a very large living benefit amount, typically over $100,000.
Enjoy the Golden Years
Help, your senior clients enjoy the golden years of retirement begin. Critical illness insurance will provide a cash benefit that is paid directly to them when diagnosed with a covered condition. Remember, the main goal of this type of insurance is to protect client savings and to provide peace of mind, so after recovery they can return to the lifestyle in which they were accustomed.