The critical illness insurance market is relatively untapped, which not only provides you with an opportunity to grow your insurance business, but also helps you in preparing your clients to deal with the consequences of surviving a critical illness — a reality for which many clients may not be ready.

Fifty-three per cent of Canadians are unaware of CI insurance, according to Mark Halpern, a certified financial planner and owner of Markham, Ont.-based IllnessPROTECTION.com Inc. And, more important, Halpern adds: “Less than 25% of all advisors have sold a CI policy.”

That presents a significant opportunity in the CI product space.

Arguably, you have a responsibility to make your clients aware of CI insurance. Left to their own devices, most individuals do not think about the possibility of experiencing a critical illness — especially when they are healthy. Rather, they suffer from what Halpern calls the “cognitive dissonance that nothing is going to happen to them.”

So, the question you should ask your clients is: “Can you afford the cost of being critically ill?”

If your clients cannot come up with a definite answer or are unsure, then it would be appropriate for you to talk to them about CI insurance.

Put simply, CI insurance provides a tax-free, lump-sum payment that can be used for any purpose when the policyholder is diagnosed with a critical illness. The payout is not necessarily aimed at covering expenses associated with a medical condition.

The pricing, terms and conditions of CI insurance vary among insurers and depend on many factors, including: age, gender, lifestyle, pre-existing medical conditions and the client’s family medical history; level, amount and term of coverage; and the number of conditions covered.

Generally, premiums are higher for men because they have a higher incidence of common critical illnesses, such as heart attacks and strokes. Premiums are, on the whole, lower for younger individuals.

“CI is still one of the most difficult insurance [products] to acquire,” Halpern says. “It not only takes into consideration your personal health, but also your family’s medical history. That’s why the best time to get it is when you’re young and healthy.”

CI can be bought as early as age 18 and as late as age 65. A basic policy covers only a limited number of common illnesses, such as heart attacks, strokes and cancers, while a comprehensive plan covers as many as 25 illnesses or more. Terms of coverage vary and can range from 10 years out up to age 100.

In some cases, premiums may be refunded to a named beneficiary if the policy-holder dies prior to receiving any benefits; or the policyholder may receive a partial refund of premiums if the CI policy is cancelled or if the policy remains in force until its expiry date and no benefit is paid. A CI policy may also have a waiver of premium if the policyholder is disabled while the policy is in force.

What is important to note, says Tim Landry, an inde-pendent living benefits consultant in Montreal, is that the “return of premium” option can add as much as 40% to the cost of a CI policy, making it much more expensive.

CI insurance is built around the fact that as advances in medical science improve, so do our chances of living longer; thus, many individuals are more likely to survive a critical illness. And if they do survive such an ailment, they could be out of commission for an extended period of time with either reduced or no income — or in the position of having to draw down on their savings.@page_break@In addition, while your clients are laid up dealing with the illness, they may: require costly convalescent care; or they may have to modify their mode of transportation; or make their homes more user-friendly or accessible; or their spouses may have to quit working to care for them, resulting in a loss of income.

In the meantime, these clients will still have to meet their regular financial commitments. CI insurance “provides peace of mind while they’re alive,” says Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. of Campbellville, Ont.

Here are some approaches to building your CI insurance business:

> Contact Clients. Send a letter to all your clients, informing them about CI insurance, suggests Halpern, who adds that you have a responsibility to provide them “with the knowledge and education to make a decision [and] to help them navigate the risks” of being critically ill. “Get them to sign a waiver,” he adds, “if they do not want CI.”

Geller notes that you could be sued for not providing the proper advice.

> Assess Clients’ Personal Situations. You should find out whether your clients would face a financial shortfall if they were to become critically ill, suggests Geller. Try to estimate this shortfall. A good question to ask: “How much money would [the client] need in the foreseeable future should you experience a major illness?

You should remember that there is additional stress when clients have to use their savings, says Susan St. Amand, president of Sirius Financial Services in Ottawa, which can affect clients psychologically.

> Educate Clients About CI Insurance. Your clients might not be aware of the benefits of CI insurance. Although it has been around for some time, says St. Amand, there is still a need for education.

Adds Halpern: “Tell [clients] everything they need to know and explain all their coverage options.”

> Do Not Compromise Need Because Of Costs. Clients may recognize the need for CI insurance, but affordability is often the main consideration. However, cost can be pared by choosing the right CI product.

You should be aware that clients typically want as many guarantees as possible, including the bells and whistles associated with the product. However, what clients want and what they need and can afford can be quite different. Ultimately, though, the decision comes down to what a client can afford.

Affordability can be addressed by recommending lower face-value amounts and shorter-term guarantees. Clients can decide to buy more affordable, shorter-term guarantees that cover their needs for the foreseeable future. Says St. Amand: “A little bit is better than nothing.”

If cost is a concern, the answers to two questions can aid in the decision: does a potential policyholder really need, say, $1 million in coverage, if he or she can return to work in a few months; is it necessary to have guarantees on 25 illnesses when more than 97% of all claims are related to only five illnesses (heart attack, stroke, cancer, coronary bypass surgery and aortic valve replacement)?

> Inform Clients That CI Insurance Premiums Could Change. In recent years, the major insurers in Canada have broadly adopted standardized definitions, which has been a big concern among many policyholders. Premiums have also gone up, but could go up again based on claims experience.

“Canada is currently the only country with guaranteed premiums,” says Halpern. “Rates could go up if these guarantees remain in place.”

On the other hand, he adds, “If there is a shift to non-guaranteed premiums, then rates could fall.” IE