What is Critical Illness Insurance for Personal Loans and Lines of Credit?
Critical Illness Insurance for Personal Loans and Lines of Credit is a type of payment protection that pays out the outstanding balance (up the maximum specified in the certificate of insurance) on your Personal Loans and Lines of Credit if you are diagnosed with a covered critical illness. This can be an important way to safeguard your family’s assets, and provide you with a financial safety net when you and your family need it most. Critical Illness Insurance is often sold as part of a bundled package with life insurance for personal loans and lines of credit.
How Does Critical Illness Insurance for Personal Loans and Lines of Credit Work?
Here’s an example of how Critical Illness Insurance for Personal Loans and Lines of Credit works:
Nadine has a $25,000 personal loan that she used to purchase a new car.
Nadine is worried that should she unexpectedly experience a serious illness such as heart attack, stroke, or life-threatening cancer, she may not be able to continue making payments on her loan and keep the car and her good credit rating.
So at the financial institution where Nadine took out the personal loan, she signs up for Critical Illness Insurance to cover the outstanding balance. Nadine knows that this type of insurance will pay out the outstanding balance on her loan (up to the maximum specified in the certificate of insurance) in the event that she contracts one of the named critical illnesses covered under the policy.
Unfortunately, three years after buying her new car Nadine has a stroke. While she is expected to recover, it could take a year or more. However, since Nadine has Critical Illness Insurance on her personal loan, her insurance pays off the balance owing on the loan, relieving her of a financial worry during a stressful and trying time.
What medical conditions qualify for Critical Illness Insurance for Personal Loans and Lines of Credit?
The typical Critical Illness Insurance policy on Personal Loans and Lines of Credit will cover cancer (life threatening), acute heart attack, and stroke.
What is the benefit that will be paid under Critical Illness Insurance for Personal Loans and Lines of Credit?
Most Critical Illness Insurance policies on Personal Loans and Lines of Credit pay out your outstanding loan balances up to the maximum specified in the certificate of insurance (typically $300,000). With Critical Illness Insurance coverage in place on your insured loans and lines of credit, one of your largest monthly expenses could be eliminated, freeing up money to use for health-related expenses such as private nursing care, physical therapy, medical equipment, and child care and babysitting services.
Who qualifies for Critical Illness Insurance on Personal Loans and Lines of Credit?
Conditions can vary, but Canadian residents between 18 and 55 years of age can usually get Critical Illness Insurance on Personal Loans and Lines of Credit from the financial institution where they have their personal loans or lines of credit. The Critical Illness Insurance benefit may be limited by a number of factors including the existence of a pre-existing condition, the use of illegal drugs or substances, and the misuse of medication. Some financial institutions only sell Critical Illness Insurance together with Life Insurance on the same personal loans and lines of credit.
How do I get approved for Critical Illness Insurance on Personal Loans and Lines of Credit?
In most cases, you only have to answer a few health-related questions and no medical examination is required. If you answer ‘No’ to the health questions and your loan or line of credit is below a certain limit (usually $300,000), you’re usually approved. Answering ‘Yes’ to any of the health questions does not necessarily mean you won’t be approved; it simply means the insurer will contact you for more details. If the total of the loans and lines of credit you wish to insure is $100,000 or less, you may not be required to answer any health questions and coverage will be automatically approved.
How much does Critical Illness Insurance on Personal Loans and Lines of Credit cost?
The cost of Critical Illness Insurance on Personal Loans and Lines of Credit is determined by your age and the amount of coverage. The older you are, and the higher the coverage, the higher the premium will be. All types of credit protection insurance coverage, including Critical Illness Insurance on Personal Loans and Lines of Credit, are provided under a group policy rather than being individually underwritten. This means more Canadians can be insured at economical standard group rates.
Where can I buy Critical Illness Insurance on Personal Loans and Lines of Credit?
A number of banks and credit unions in Canada, including some CAFII member financial institutions, offer Critical Illness Insurance for mortgages, personal loans, lines of credit, and credit card balances. Employees at CAFII member institutions are trained and knowledgeable about the products they sell, and they can be conveniently reached in branches or at call centres. You can find a list of CAFII member institutions at: https://members.cafii.com/index.php/members_voting.
