Critical Insurance
Frequently Asked Questions For Insurance & Financial Advisors
Sales & Marketing:
- What is Critical Insurance?
Critical Insurance pays a lump-sum benefit that you can use any way you wish when you are diagnosed with a covered critical illness, as defined in the policy.
- What is the history behind Critical Insurance?
“Not because you are going to die but because you are going to survive.” Dr Marius Barnard
- Why do your clients need Critical Insurance coverage?
A Critical Illness diagnosis is unfortunately more common than we would like to think. 1 in 5 men and 1 in 6 women will suffer a critical illness before their retirement as the average age of people on claim is 47 (Source: Munich Reinsurance Co 2000). Anyone who has been diagnosed with a critical illness once said “it won’t happen to me” and they were right…until they weren’t. We genuinely hope that no one will ever have to experience a critical illness diagnosis, but people never plan to fail, they simply fail to plan. We are responsible for helping people plan. Please consider the following facts:
- About every 25 seconds, an American will have a coronary event (CDC Website 01/29/10).
- A new Harvard University report reveals that 62 percent of all personal bankruptcies filed in the U.S. in 2007 were due to an inability to pay for medical expenses. (The American Journal of Medicine, June 4, 2009)
- Although heart disease is sometimes thought of as a "man's disease", it is the leading cause of death for both women and men in the United States, and women account for nearly 50% of heart disease deaths (CDC Website 01/29/10).
- Below is the percentage of U.S. adults with heart disease risk factors in 2005-2006
- Risk Factor %- Inactivity 39.5- Obesity 33.9- High Blood Pressure30.5- Cigarette Smoking 20.8- High Cholesterol 15.6- Diabetes 10.1 In 2003, approximately 37% of adults reported having two or more of the risk factors listed above (CDC Website 01/29/10)
- Every year about 785,000 Americans have a first heart attack. Another 470,000 who have already had one or more heart attacks have another attack (CDC Website 01/29/10).
- Someone in the United States has a stroke every 40 seconds. Every three to four minutes, someone dies of stroke (CDC Website 01/27/10)
- Stroke is a leading cause of serious long-term disability (CDC Website 01/27/10)
- 1 in 5 men and 1 in 6 women suffer a critical illness before their usual retirement age.
- From 2003-2007, the median age at diagnosis for cancer of all sites was 66 years of age. Approximately 1.1% was diagnosed under age 20; 2.7% between 20 and 34; 5.7% between 35 and 44; 14.0% between 45 and 54; 22.3% between 55 and 64; 24.7% between 65 and 74; 21.8% between 75 and 84; and 7.7% 85+ years of age (National Cancer Institute Website).
- On January 1, 2007, in the United States there were approximately 11,713,736 men and women alive who had a history of cancer of all sites -- 5,353,054 men and 6,360,682 women.
We believe it is not wise to ignore these risks. Hopefully a critical diagnosis will not happen to you or your clients, but wouldn’t it be better to know that they have the financial resources in place just in case? Critical Insurance can provide that peace of mind. Critical Insurance pays a tax-free sum of money should your client get diagnosed with a covered illness listed in the policy.
- Why do so many agents have problems selling Critical Insurance?
We believe the answer to this question is very simple. It is our opinion that Insurance and Financial Advisors who have a hard time selling Critical Insurance have not been trained properly. Unfortunately, Insurance and Financial Advisors try to “elephant hunt” instead of learning to “eat the elephant one bite at a time”. We have found that Insurance and Financial Advisors are usually being “trained” by people to use scare tactics and emotions as a primary motivation to get clients to purchase insurance. And because many of these trainers do not understand other product lines, they really aren’t able to train agents how to properly implement Critical Insurance in conjunction with a well thought out plan of protection. Needless to say, this leads to Insurance and Financial Advisors trying to sell high face amounts of coverage up front to every client they present.
We believe your clients will make good business decisions based on complete and accurate information and as such, selling with fear should have little to do with a responsible recommendation. Training should include understanding the importance of and how to gather information, the importance of coordinating Critical Insurance with other products to protect the entire portfolio and finally, how to take clients down the path of proper education so they can have confidence in the decisions they are making. We look forward to training you how to be successful with Critical Insurance.
- Who is buying Critical Insurance?
The demographics of those purchasing Critical Insurance are:
- Male and Female
- Ages 26 to 55
- Income of $20k to over $1 million
- Diverse Occupations ranging from blue to white collar (not in any particular order):
- Doctors and other medical professionals- Business Owners/Independent Contractors- Executives- Attorneys and CPAs- Insurance and Financial Advisors- Office and Administrative Workers- Mechanics- Hairstylists- Teachers- Police and Fireman- Why should I purchase a Critical Insurance policy?
For the same reasons your clients should buy CI. In addition, your clients will follow the leader. A picture is worth how many words? Are you looking to separate yourself from the other Insurance and Financial Advisors? Owning what you are selling is one of the most effective means of accomplishing that.
As you know, a critical illness can be diagnosed at any time and happen to even the healthiest of people. The only way to ensure that an illness doesn't rob you of both your physical and financial health is to have both medical and non-medical costs insured. Medical technology has changed the ballgame. We are able to live longer…not necessarily healthier. A sharp increase in life expectancy and drastically changing lifestyles, in addition to poorer diets, less exercise, and increased stress has increased the likelihood of a critical diagnosis. However, the good news is that survival rates for critical illnesses have more than doubled over the last 10 to 20 years. This also means that more people are left with a great financial burden after their treatments have ended though.
- Will Critical Insurance pay a benefit in addition to your client’s other insurance policies?
Yes. Critical Insurance pays over and above/in addition to any other coverage your client has in force. However, it is strongly suggested that they have the proper amount of Life Insurance, Health Insurance and Disability Insurance in place to compliment their Critical Insurance coverage.
- Your client has Life Insurance…do they need Critical Insurance?
Absolutely! Life Insurance is imperative as it primarily pays a benefit to beneficiaries upon death of the insured. We should never confuse the need for Life Insurance and the need for Critical Insurance as both were designed to perform completely different functions. The real question here is what happens to a financial plan if the insured person doesn’t die…they came very close, it will be a long recovery but they didn’t die. Will the life insurance policy pay a benefit in this case? Critical Insurance was designed to pay a benefit when the person LIVES but will also pay a death benefit if the insured doesn’t survive the diagnosis.
- Your client has Health Insurance…do they need Critical Insurance?
Absolutely! Health Insurance was designed to pay for doctor and hospital bills. We should never confuse the need for Health Insurance and the need for Critical Insurance as both were designed to perform completely different functions. The real question here is what happens to a financial plan if the insured needs to go Out of Network and get the best treatment for their condition? Are they prepared for the costs not associated with doctor and hospital bills, such as: Out of Network deductable and co-insurance changes, travel, lodging, food, replacement of income for insured and spouse, continued retirement funding, etc?
- Your client has Disability Insurance…do they need Critical Insurance?
Absolutely! Disability was designed to protect a percentage of your client’s paycheck. We should never confuse the need for Disability Insurance and the need for Critical Insurance as both were designed to perform completely different functions. The real question here is what happens to a financial plan if the insured was having a tough time living on 100% of their income, let alone 60%, prior to their diagnosis? In addition, will a Disability policy pay for a person to leave work and take care of their spouse? A quick thought process, if you are not able to get enough Disability coverage for your clients due to their occupation or because they are not able to replace enough income with a traditional Disability policy due to having a large income, Critical Insurance does very well at making up the difference…
- Your client has Long Term Care Insurance…do they need Critical Insurance?
Great question! In all reality, the answer to this question is very simple: this question shouldn’t even be asked. These products are similar because each product has its place in protecting the estate and the retirement portfolio. However, what we first need to consider is the age group each product was specifically designed for. Critical Illness insurance was designed to protect the retirement portfolio during the Asset Accumulation stage of life. This is the stage of life where people are building towards retirement. This age group is from 25 to 55…maybe age 60 depending on a person’s retirement timeline. Critical Insurance helps ensure that there is an estate and retirement portfolio left for Long Term Care Insurance to protect once a person reaches retirement age. Cash does a better job for these people as it can be used for many more purposes than a Long Term Care policy.
Long Term Care Insurance was designed to protect the retirement portfolio during the Asset Preservation stage of life. This is the stage of life where a person has already built most, if not all, of their retirement and is concerned about outliving what they have built up. This age group is anywhere from age 55/60 and above. Critical Insurance should never be used to replace Long Term Care during this stage and Long Term Care should never be used to replace Critical Insurance during the Accumulation stage.
- Your client has Cancer Insurance…do they need Critical Insurance?
Great question! These two coverages are very different from each other. The only similarity is that they both have benefits for cancer. Critical Insurance pays a tax free, lump sum benefit and Cancer policies typically are a Schedule of Benefits plan that reimburse medical bills based on certain treatments taking place. We recommend that your clients purchase a Critical Insurance policy over a Cancer plan for the following reasons:
- Tax free, lump sum of money that the insured is entirely in control of and can used for whatever purpose they desire versus a Schedule of Benefit Cancer plan that reimburses a benefit (we refer to as nickel and diming) each time a person has a qualified treatment
- Money provides people with the option of getting treatments anywhere in the world…including alternative treatments. Schedule of Benefits Cancer plans often do not reimburse for alternative treatments.
- What is the “Present Value” of your client’s dollar? Would most people prefer all their money now or portions of it reimbursed based on costs they incur at sometime in the future? Keep in mind, there is no guarantee of getting as much benefit with a Schedule of Benefit plan versus the lump sum benefit.
- Critical Insurance covers more conditions that just Cancer. Therefore a higher likelihood of paying a benefit.
- We prefer clients to be in control of their benefit dollars when possible. It is much easier to be in control of a benefit when it is paid up front without the carrier involved in how the benefit is used.
- What is the difference between CI and DI?
DI was developed to protect the paycheck; CI was developed to protect the retirement portfolio.
- DI has occupation restrictions; CI really doesn’t
- DI has pretty strict financial underwriting; CI really doesn’t
- DI requires continued proof of disability documentation; CI doesn’t
- Di reimburses income on a monthly basis; CI pays a tax free, lump sum benefit
- What are the costs associated with a critical illness diagnosis?
There are two basic costs that come with critical illness. First are the medical expenses such as hospital and doctor bills. These costs are usually covered by standard medical insurance...though to the surprise of most, too many procedures and treatments are not covered.
The second and potentially more devastating type of cost is the non-medical expenses that are not covered by Medical Insurance and have to come out of your own pocket. These expenses go beyond the obvious deductibles and co-payments. Non-medical costs include the loss of income you and your spouse will experience while unable to work and/or caring for a sick family member. Other costs include: retirement funding, business continuation assistance, transportation, hotels, special diets, home modifications, and family care (to name a few).
- How much Critical Insurance coverage does your client need?
Here are several points to consider:
Business:
If your client owns their own business, they would need to hire extra staff to take over many of their tasks to lighten workload. How many other business expenses are ongoing whether or not they are bringing in any revenue, such as offices expenses, subscriptions and wages? How would having a cushion of several months’ revenue make a difference in coming back to running their business?
Home:
Some illnesses may require their home to have modification. They may need to install ramps put where there are currently steps. If they need mobility assistance, having an electric wheelchair or similar device could be imperative to helping them become more independent. However, as we are all too aware, everything costs money. Imagine someone in a wheelchair. Are their cupboards at the right height? Are their doors wide enough? Is the carpet suitable for an indoor electric chair or mobility device? Can they get up the stairs without assistance?
Repay Loans:
How much would they need to continue paying their mortgage, overdraft, loans and/or any credit card balances? The freedom that comes from being debt free does wonders for physical and mental recovery.
Medical Expenses:
The cost of Out of Network Doctors and Consultants’ must be taken into account. Following their advice, there usually is an extra cost for experimental procedures and treatments and for adequate occupational therapy or physiotherapy.
Costs Related to Recovery:
How much would your clients be able to afford in travelling to and from out of town consultants, specialists and hospitals for recovery purposes? If your client were in hospital for a lengthy time, how much would their family incur in travelling costs, staying in a nearby hotel and for food? Perhaps a vacation would help speed their physical and mental recovery?
- What criteria are used to help choose the right company for my client?
It is important to work with The Ark Group when in the process of choosing the right company for your client. We always help you make decisions with regard to your client’s best interest based on each client’s unique situation. Critical Insurance policies can be compared based in part, on the following criteria:
- Policy Definitions
- Policy Benefits
- Policy Riders
- Your Client’s Health History
- Financial Strength of the Insurance Company
- When is the best time to buy a Critical Insurance policy?
Because premium and policy eligibility are based on age and health status, the best time to buy a Critical Insurance policy is when your client is young and healthy. However, we understand that not every client is in the most ideal age and health status. So, we recommend you speak to your clients NOW…in other words, do not procrastinate. We dare you to talk to one of your clients today about the importance of protecting their retirement portfolio. Who knows, you may actually protect a client from future financial disaster. How would that make you feel?
- How long should you help your clients insure for?
If you are using their Critical Insurance policy to protect a mortgage, then the policy should remain in force until their mortgage is due to be fully repaid. For income purposes, they should insure for the percentage of income their Disability Insurance doesn’t cover and for the longest time period they can afford.
- How much coverage should I consider purchasing on myself and for my clients?
We use a combination of the following list in a formula while considering the best benefit amount for you and your particular client’s circumstance:
- 3 x to 5x Annual Income
- Total Outstanding Mortgage
- Total Outstanding Debt
- Total Amount of Money Put Away for Retirement Annually
- Business Loans and Expenses
- Please Call Us for a Detailed Review
- What decisions should you make before you quote your client Critical Insurance?
Here are several points to consider:
- How long they need the policy to be in force?
- How much benefit amount they need to insure for?
- Whether they want to insure yourself or include your spouse?
- Whether they want a Simplified Issue or Fully Underwritten policy?
- Can an Employer pay for my client’s Critical Insurance coverage?
Your client’s Employer can pay for their Critical Insurance coverage, but if the Employer pays for the coverage on a pre-tax basis, in most cases, it will cause the benefit to be taxable to your client.
- Are Critical Insurance benefits taxable?
Critical Insurance benefits received by an insured who has elected to have the coverage paid on an after-tax basis for the plan year are excludable from the insured’s gross income under IRC §104(a)(3).
Critical Insurance benefits received by an employee whose coverage is paid by an Employer on a pre-tax basis for the plan year in which the employee becomes disabled are includable in the employee’s gross income under IRC §105(a).
- Is there a prospecting system for Critical Insurance that works?
Yes! Effective prospecting is more than mailers…it requires networking in order to be successful! Call for more information.
- Why should you sell Critical Insurance?
No one likes to think about what life would be like should they get diagnosed with a life threatening/altering condition and the recovery involved in such a diagnosis. However, as an Insurance or Financial Professional, it is your responsibility to help people consider the consequences of not planning properly. Critical Insurance is a key component of any sound financial and risk management plan. Should your client suffer a life threatening/altering diagnosis, their plans for future retirement are put at risk. How will their current bills get paid, what happens to their home, will the children still be able to go to college, will they be able to enjoy a secure retirement and how will they continue to fund for that retirement plan? Since each client is unique and no two clients are the same, the questions we ask like this can be as numerous as the individual situations your client could face.
The Ark Group is a Critical Insurance product and planning resource for thousands of Insurance and Financial Professionals nationwide. We are recognized experts in the insurance industry and are dedicated to supporting your efforts in helping your client’s put together a protection plan that is appropriate based on their unique situation. We will help you learn more solution based concepts available to your clients with advanced case design and access to scheduled training sessions.
- Can I Partner with The Ark Group to Sell Critical Insurance?
If you are an Agent or Financial Advisor looking to sell Critical Insurance products, you will want to contact The Ark Group to get appointed with each of the companies we are contracted with. We work with Insurance Agents and Financial Advisors in all 50 States. Simply pick up the phone and call our office at 866-725-0777. We do not take building a relationship with you for granted and look forward to earning your business!
- Why Should I Partner with The Ark Group to Sell Critical Insurance?
We are a National Independent Brokerage Agency and work with the best Critical Insurance companies. From white collar professionals to blue collar workers, we make sure your client has access to the most comprehensive Critical Insurance policies available on the market today. We understand that Critical Insurance policies are a legal contract, and that your client needs to have the best coverage available based on their unique situation. Every Disability Insurance policy is different, and as such, will pay benefits based on the specific definitions within their contract.
Our agency makes recommending and selling Disability Insurance as easy of a process as it can possibly be for Insurance Agents and Financial Advisors. Not only do we assist in policy comparison and review, we also provide training that will cover sales, product and concepts that will help you take care of your clients in the best way possible. In other words, we provide you with everything you could possibly need to evaluate a policy, and help your client make an intelligent business decision, while making sure you are well compensated.
Product:
- How does Critical Insurance work?
Critical Insurance pays a tax free, lump-sum benefit that you can use any way you wish when your client is diagnosed with a covered critical illness, as defined in the policy. There are no limitations as to how your client can use their benefit payment. Having a lump sum benefit gives your client the freedom to find services that will help them and their family find the best medical care, meet everyday needs and cope with the stresses of a critical illness. Should your client die from a condition or a reason that is not covered by the policy, all (100%) of premiums are returned to the beneficiary…a true win/win product.
- What conditions are typically covered on a Critical Insurance policy?
A critical illness is a life-threatening event that, thanks to the incredible advances in medical technologies, is increasingly survivable. This coverage was not designed to be “hang nail” insurance and cover all conditions critical or not. The conditions intended to be covered are life altering and could include (not all policies cover each of the listed conditions):
- Heart Attack- 100% Benefit
- Cancer- 100% Benefit
- Stroke- 100% Benefit
- Advanced Alzheimer's Disease- 100% Benefit
- Angioplasty- 10% to 25% Benefit
- Aortic Surgery- 100% Benefit
- Benign Brain Tumor- 100% Benefit
- Blindness- 100% Benefit
- Coma- 100% Benefit
- Coronary Bypass Surgery- 10% to 25% Benefit
- Deafness- 100% Benefit
- End-Stage Kidney Failure- 100% Benefit
- Heart Valve Replacement- 100% Benefit
- In Situ Cancer- 10% to 25% Benefit
- Loss of Independent Living-100% Benefit
- Loss of Speech- 100% Benefit
- Major Burns- 100% Benefit
- Major Organ Transplant- 100% Benefit
- Motor Neuron Disease-100% Benefit
- Multiple Sclerosis-100% Benefit
- Occupational HIV Infection- 100% Benefit
- Paralysis- 100% Benefit
- How much does Critical Insurance cost?
Critical Insurance is vital to the protection of your client’s financial plan. If your client does not have protection for their retirement plan with Critical Insurance, your client’s finances and financial future is at stake. With Critical Insurance coverage, your client will ultimately get what they pay for because policies vary greatly from company to company, which is why you should not compare on price or benefits alone. That being said, there are several factors that go into the cost of a Critical Insurance policy. These factors include, but are not limited to:
- Your client’s gender
- Your client’s health
- The benefit requested
- Whether the underwriting is Simplified or Fully Underwritten
A good policy can be as inexpensive, or as expensive as your client wants it to be based on the type of plan and the face amount chosen. As a general rule of thumb, your client can expect to pay between 1-3% of your annual income for good Critical Insurance coverage. A great question to ask your clients is: “Would it make sense to begin protecting your retirement portfolio today if the cost of a Critical Insurance policy was no more than the cost of a cup of coffee per day?”
- Can your client include their partner on a Critical Insurance policy?
Yes, as with Life insurance, Critical Insurance policies can include one or two lives.
- Can your client and their partner have different levels of coverage on a Critical Insurance policy?
Yes but it may be better to buy two separate policies as some carriers will not allow the secondary insured to have a higher benefit amount than the primary insured.
- Can your client include their children on a Critical Insurance policy?
Yes. It is always best to check with the insurer first but most of the carriers we work with will include child coverage on a rider and only up to a certain age in the policy. Critical Insurance policies will pay a tax free, lump sum benefit if a child is diagnosed with one of the covered critical illnesses listed on the policy. To qualify a child has normally to be aged between 1 and 18 years (although some companies only consider children to age 21).
As a side note, a benefit payment made under the children’s rider provision will NOT end the policy. Therefore, the policy will remain in force and your client will still be able to make a claim. When the children reach the maximum age under a Children’s Rider, they are no longer insured under the policy but if they want to continue coverage, they must take out their own policy. It would not be a problem if the parents paid the premium for the new individual coverage.
- Are future children included on a Critical Insurance policy?
Yes they are. All natural, step and legally adopted children are insurable under a Critical Insurance policy so long as they are aged between the ages allowed on the Child Rider. Unfortunately, foster children are not covered under this option as they are considered to be in temporary care.
- What amount of Critical Insurance coverage is available to get for children?
The carriers we work with impose a maximum limit on any claim under the policy’s provisions for Child Riders and typically the face amount available is between $5,000 and $25,000.
- What could Critical Insurance benefits be used for?
Benefits can be used for anything you want! Help with paying medical expenses; paying the mortgage; home modifications and general living expenses, to name a few. Surviving a critical illness can change your client’s life in many ways. They may well have to give up work for an extended period of time and this would obviously have a major impact on their lifestyle. Having extra financial resources available would help them to manage these changes. There is a lot to be said for having a financial cushion to make things easier. Consider some of the benefits extra money would provide:
Medical Expenses:
If they need medical services outside of their Network, costs are not reimbursed the same by their Medical Insurance and can be very expensive. A serious illness often requires a long period of medical attention. So the costs keep on mounting up. Critical Insurance can help provide the extra cash to pay for this type of expense.
Paying the Mortgage:
Reducing stress is a major factor in how quickly your client rehabilitates. In a 2003 study, the Mayo Clinic noted that those who have $100,000 or more in assets get better quicker. Not having the concern about whether your client can pay their mortgage and outstanding debts would be a big help.
Changes to Lifestyle:
It is impossible to predict exactly how a critical illness would change your client’s lifestyle. But consider just some of the possibilities: they may need to make structural changes to their home, such as widening the doorways, installing a stair lift or making sure that everything is easier for them to reach; their mobility would be important so they may find that adjustments are needed to their car or even a different type of car is required; if they have children and their mobility or energy is affected, then having the right level of coverage would mean that they could afford to have the childcare they need to assist in their recovery. The problem is that everything you can think of is almost certainly going to cost extra money, money that could be provided through a Critical Insurance policy.
Cash for the Future:
With the right amount of coverage in place, your client could afford to take a much needed vacation to help their rehabilitation. At some point in time, your client also wants to retire. Most people not only stop funding retirement after a critical illness diagnosis but they also end up taking money from their retirement to pay for expenses. Instead of postponing or forfeiting a comfortable retirement, they could use the tax free dollars in a Critical Insurance policy benefit to fund their retirement instead.
- What should I look for in a good Critical Insurance policy?
There are many Critical Insurance products available but not all of them are as good as others. Here are a few things to keep in mind when reviewing a Critical Insurance product:
- Clear Benefit Definitions
- Return of Premium at Death
- Total Number of Covered Conditions
- In-Situ Cancer Coverage
- Lump Sum Benefit versus a Schedule of Benefits Policy
- Carrier Financials
- What qualifies as a diagnosis of a Heart Attack?
Benefit definitions can be different per policy but an example of a good definition is: An Acute Myocardial Infarction resulting in the death of a portion of the heart muscle (myocardium) due to a blockage of one or more coronary arteries and resulting in the loss of the normal function of the heart. The Diagnosis must be made by a Legally Qualified Physician board certified in Cardiology and based on both:
- New clinical presentation and electrocardiographic changes consistent with an evolving heart attack; and
- Serial measurement of cardiac biomarkers showing a pattern and to a level consistent with a Diagnosis of Heart Attack.
- What qualifies as a diagnosis of a Life Threatening Cancer (not In-Situ Cancer)?
Benefit definitions can be different per policy but an example of a good definition is: A malignant neoplasm, which is characterized by the uncontrolled growth and spread of malignant cells and the invasion of tissue, and which is not specifically hereafter excluded. Leukemias and lymphomas are included. The following are not considered Invasive Cancer:
- pre-malignant lesions (such as intraepithelial neoplasia); or
- benign tumors or polyps; or
- early prostate cancer diagnosed as T1N0M0 or equivalent staging; or
- Cancer in Situ; or
- any skin cancer (other than invasive malignant melanoma in the dermis or deeper or skin malignancies that have become metastatic); and
- Invasive Cancer must be diagnosed pursuant to a Pathological or Clinical Diagnosis.
- What qualifies as a diagnosis of a Stroke?
Benefit definitions can be different per policy but an example of a good definition is: Any acute cerebrovascular accident producing neurological impairment and resulting in paralysis or other measurable objective neurological deficit persisting for at least 96 hours and expected to be permanent. Transient ischemic attack (mini-stroke), head injury, chronic cerebrovascular insufficiency and reversible ischemic neurological deficits are excluded. The diagnosis must be made by a Legally Qualified Physician board certified in Neurology.
- What does Loss of Independent Living mean?
Benefit definitions can be different per policy an example of a good definition is: An insured person both initially incurring and being diagnosed, by a physician, with permanent loss of two or more activities of daily living, including:
- Transfer and Mobility
- Continence
- Dressing
- Toileting
- Eating
- Bathing
A typical elimination period for Loss of Independent Living (ADL) is 180 consecutive days during which an insured person must be unable to perform two or more activities of daily living. The elimination period usually begins after the end of the 30-day waiting period.
- How quickly do benefits get paid on this policy?
Benefits of a claim are usually paid out about two weeks after the claim is substantiated.
- How much face amount benefit does a person have available?
Benefit amounts can range from a minimum of $5K to a maximum of over $1 Million. Premiums vary between these two amounts in $1K increments.
- Will your client’s premiums ever increase?
Unfortunately, there is no way of guaranteeing that a premium increase will never take place. These policies are priced up front to not ever have an increase though. Remember that premium increases happen because people are using their policy. If your client’s policy ever does go up in premium, it would be important to remember that there were more people being diagnosed and using their coverage than anticipated. The good news is that at least people had the coverage in force to help them with their recovery…which in our professional opinion, is all the more reason to maintain your client’s coverage, even if a rate increase takes place.
- What happens to the policy and premium when a partial benefit gets paid?
This depends upon the insurance company but a majority of the time if a partial benefit is paid, the remaining face amount will still be available for another diagnosis. The premium usually will decrease by the same percentage as the partial benefit percentage.
- How does Return of Premium work?
This benefit is pretty straight forward… If the Insured dies while this Policy is in force, the carrier will return to the Owner, or to the Owner’s Beneficiary if the Owner is deceased or to the Owner’s estate if there is no Beneficiary, 100% of all Premiums paid for this Policy, less any benefits paid under this Policy or its attached Riders (except for the Spouse Rider if the Spouse Rider conversion option is exercised). The Premiums to be returned will be calculated without interest and after all pending claims have been settled. If the sum of all Benefits paid under the Policy and applicable Riders is equal to or greater than the sum of the Premiums paid, there will be no return of Premium(s). There are two kinds of ROP
- Returns all premium (minus any claim) upon death and is automatically included on the policy
- Returns all premium (minus any claim) at age after a specified period of time
- Are Critical Insurance policies “Guaranteed Renewable”?
Almost all of the policies we represent are Guaranteed Renewable for life. The exception to this is on certain simplified issue policies which are guaranteed renewable until age 75.
- What is a Survival Period?
A survival period is the number of days your client must survive, following the diagnosis of a covered critical illness, before a benefit is payable. The minimum survival period for most covered conditions is 30 days. None of the carriers or policies we represent has a Survival Period in their policy.
- How do waiting periods affect a Critical Insurance policy?
Waiting periods differ by state. A waiting period begins once a policy is effective and can last up to 90 days from that date. Not all conditions on the policies have waiting periods. So, in the event of a diagnosed condition during the waiting period, a small portion of the benefit amount or ROP will be paid as the benefit. A Waiting Period is entirely different than a Survival Period.
- Aren’t all Critical Insurance products basically the same?
No. Critical Insurance policies usually fall under two categories and differ tremendously.
Life Chassis:
- Good:
- Can pay a death benefit regardless of the cause of death- Bad:
- Premiums are based on mortality rates, not incidence based rates
- Benefit definitions are tougher to qualify for
- If this is the only life policy a person has and we accelerate the benefit, what did we just do to the beneficiary?- Used as a gimmick to sell more life insurance- Not the right thing to do in planning for a client- At the end of the term, premiums are guaranteed to increaseHealth Chassis:
- Good:
- Premium based on incidence rates- More lenient benefit definitions- Usually less expensive- Doesn’t take away from the life insurance benefits- Premiums can only increase by class basis and Department of Insurance must allow the increase- Bad
- Doesn’t pay a benefit for any cause of death- Can be quirkier in underwriting- Are Critical Insurance benefits taxable?
As long as the premiums for a Critical Insurance policy are paid with post tax dollar premiums, it is our understanding that a benefit payout will be tax free.
Underwriting:
- What is underwriting?
Underwriting is the process of selecting applicants by which an insurance company examines specific risk factors by classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The underwriting process includes the possibility of rejection for those risks considered unacceptable. Insurance Companies price their products based on risks they consider acceptable and unacceptable. As such, one company might be more competitive with a particular risk than another. We help you decipher which company will work best for your clients based on their unique situation. Examples of what is considered in evaluating your client’s risk may include:
- Previous Medical History
- Family Health History
- Driving Records (MVR)
- Medical Information Bureau (MIB.com)
- Financial Records
- Occupation
- Dangerous Hobbies
- Height and Weight
- Drug and Alcohol Use
- How long does it take to get a quote for my client?
First, it is important to understand that we are more than just an agency that provides quotes. In fact, the best way to utilize us is getting us involved in case development, research and implementation. In most cases, we will be able to assist you in uncovering other needs for your client. We will then help you design the proper insurance protection plan for that client.
So, as long as you provide us with the appropriate information when you request the quote, we will turn your quote around within the next 24 hours. Our Critical Insurance Quote Request form has a listing of the information we need from you to find the right company for your client’s unique need and provide you with a quote.
- How does The Ark Group’s application and new business process work?
- Application is received by The Ark Group wither via email, fax or mail.
- We review the application and make sure it is complete.
- Our application review depends entirely on how well the applications are completed by the advisor.
- if application is complete and was received before noon: same day submission to the company- if application is complete but received after noon: the next morning it will submitted to the company- if the application is not complete and was received before noon: same day request for outstanding information from the advisor- if the application is not complete and was received after noon: the next morning we will request outstanding information from the advisor- Once the application review is complete, we submit the application to the home office.
- it usually takes less than 24 hours from receipt to submission of application- many times we get priority processing due to the amount of business we do- if we receive a mailed application with a check, after proper review, we overnight the completed app and check to the company- We will begin following up on the new business the next week.
- Should a paramed exam be required and you request that we order all parameds for your office; we will order the paramed exam within 24 hours of receiving your application.
- we primarily order parameds through APPS- we get updates when the client is contacted, schedules their medical and completes their medical- in most cases, we get immediate access to copies of the medical and lab slips online - When the paramed exam is completed and forms returned to our office, we will submit everything to the insurance company for underwriting.
- When we submit an application to the home office, it usually takes 24 to 48 hours for it to be processed, imaged and ready for the underwriting review team.
- The underwriting review team makes sure they have everything they need for the underwriter to review and then places the app into queue.
- From the time we receive an application to the time an underwriter begins reviewing the application is approximately 4 to 4 business days unless you did not complete the application properly.
- From time to time, a representative from the insurance company may call your client to confirm their answers on the application. These Phone Interviews usually take around 20 minutes.
- Approximately 7 to 10 business days from when you submitted the application, you will begin receiving weekly emails from our office regarding each of your pending applications
- New Business can take an average of 45 to 60 days in underwriting…just depends on health history and how thorough we are with the application up front
- In our opinion, it is always wise to tell your clients that it will take an average of 45 to 60 days to receive a decision from the underwriter
- now, it isn’t often that it takes this long but we always like to under promise and over deliver- in most cases, it takes less time but we would rather have you under promise and over deliver to your clients- We will communicate with you once your New Business is approved. If it is approved with a lesser rating than originally applied for, we are usually able to communicate that with you prior to the file getting issued and mailed. However, some insurance companies issue and mail the policy upon approval and before we have the chance to communicate with you.
- We will continue updating you on your New Business until it is placed “In Force”
- What are the usual problems that cause delays in underwriting?
There are a few common factors that can cause delays in the underwriting of your application. As a Professional Advisor, you can help reduce the delay time by providing a high level of detail when you complete the application, ask your client’s to communicate with their physicians to provide their medical records quickly, be respondent to outstanding requirements and if you schedule your own parameds, make sure to schedule it the same day you take the application. Here is a brief list of the most common problems:
- How complete is your client’s application? - If you provide all of the details the insurance company needs up front, it takes us less time to keep coming back to you for clarification on the application. So it is always a good idea to provide a high level of detail when you apply for coverage through one of our companies.
- How long will it take to obtain your client’s medical records? - This probably causes more delays than any other part of the underwriting process. The insurance company generally requests a copy of your client’s medical records from their general physician, a specialist or both. We are all at the mercy of their doctor’s office once the formal request has been made. Sometimes medical records are obtained within a couple days but that is not very normal…especially if your client’s doctor requires a special HIPAA Authorization to release records or is a part of Kaiser Permanente.
- How respondent is the advisor to their pending business? Once our office begins forwarding emails to you regarding your pending business, we suggest you review, respond to requests as necessary and provide us with the outstanding requirement as soon as possible.
- Can a prospect still qualify if they have been previously diagnosed with a covered condition?
Unfortunately, the answer to this question is “No”…in most cases. If a person is currently blind or deaf, the insurance company can offer coverage but either of those two conditions would get ridered off the policy. If this is your client’s situation, there might be alternatives to Critical Insurance that should be considered. Please call us for a free evaluation on what is available specific to your client’s unique situation.
- What are a few of the quirks with Critical Insurance underwriting?
- Family History
- Diabetes
- Previous Diagnosis (regardless of amount of time since last diagnosis)
- Height/Weight
- Colon Polyps
- Cholesterol Readings
- What are a few of the advantages to Critical Insurance underwriting?
- No occupation restrictions (for the most part)
- Back problems do not present a challenge
- Controlled anxiety problems do not present a challenge
- Some policy types are Simplified Issue
- Financial underwriting is not stringent
- If a prospect is declined Fully Underwritten coverage, can they reapply with Simplified Issue?
No. However a client could be declined for Simplified Issue product and then reapply with the Fully Underwritten product
- Are underwriters available for me to call with questions?
It depends on the carrier. However, it is strongly recommended that you call The Ark Group first as we have nearly 10 years of experience in Critical Insurance underwriting.
- Your client just had a life insurance policy issued, is a Critical Insurance application likely to get issued?
Life Insurance and Critical Insurance are evaluated differently in the underwriting/risk evaluation process. Just because they got a Life Insurance policy does not automatically mean they will get a Critical Insurance policy. We will need to evaluate what their unique health and family history risks are to have an idea as to whether they can get a Critical Insurance policy and if that policy would have a rated premium.
- What factors can affect your client’s premium?
Several factors are taken into account when deciding insurance premium. These include your client’s age, gender, weight, tobacco use, as well as the medical history of their family and any existing illnesses or underlying conditions they may have, or have had in the past.
- Does Critical Insurance qualify under Section 125?
Possibly. Call for further information.
- Can an entity, individual or charity own the policy and be a qualified beneficiary?
Yes. However there are important guidelines…call for more information.
- Does the agent need to be an underwriting expert to sell Critical Insurance?
No. When in doubt, rate up 25% or call The Ark Group.
- Is Guaranteed Issue available?
Yes. Guaranteed Issue is available on group business only.
Simplified Issue:
- What does Simplified Issue underwriting mean?
This means that the policy is issued based on answering basic health questions on an application, without requiring a medical exam or medical records from your client’s doctor. The underwriting turnaround is 4 to 7 business days. This is convenient but the premiums tend to be a little more expensive since the insurance company isn’t doing as much risk evaluation and the benefit amount available is lower…usually up to $100,000 total. Benefit amounts higher than that amount are always Fully Underwritten.
- What are the underwriting requirements for Simplified Issue?
- “Yes” or “No” Application
- Non medical (no parameds)
- MIB check
- Rarely will an APS be ordered (3-5% of the time)
- What is the average turn around?
4-7 business days (If an application is complete and has no MIB hit, Assurity guarantees a 4 business day turnaround or $100!)
- Is the application process for Simplified Issue actually simple?
Yes, in fact, you are not required to be in person when taking an application, the company can draft the first month’s premium and the carrier doesn’t require an original signature.
- What are a few of the quirks to Simplified Issue?
- Limited access to a client’s health information, a person may be declined. Whereas if they would apply for Fully Underwritten coverage they may qualify
- There tend to be more amendments to be signed by the client when delivering the policy
- Less coverage available
- What are a few of the advantages to Simplified Issue?
- Shorter application
- Quicker underwriting turnaround
- No rate ups – pass or fail underwriting
Fully Underwritten:
- What does Fully Underwritten underwriting mean?
This means that the policy is issued based on answering health questions, a medical exam is normally required, a phone interview is normally required and medical records can be ordered. The underwriting turnaround is 30 to 45 business days. This is a little more tedious of a process but the premiums are usually a little less per thousand ($50,000 of Fully Underwritten is less than $50,000 of Simplified Issue) and there is access to greater benefit amounts…typically $500,000 or greater.
- What are the underwriting requirements for Fully Underwritten Critical Insurance?
- Paramed (short form; except large face amounts require long form)
- Labs (blood and urine)
- Phone interview (not with all companies)
- EKG or ECG (needed for larger face amounts)
- MD Exam (needed for larger face amounts and older age applicants)
- MVR (needed for larger face amounts)
- Medical Records
- How long does underwriting normally take?
New Business can take an average of 45 to 60 days in underwriting from the time we receive all completed paperwork. It depends on your client’s health history and how thorough we are with the application up front. Most of the time spent in underwriting is collecting information (medical records, tax returns, etc.) the underwriter needs to make an informed decision. In our opinion, it is always wise to tell your clients that it will take an average of 45 to 60 days to receive a decision from the underwriter. It isn’t very often that it should take this long but we always like to under promise and over deliver. In most cases, it takes less time but if you provide your client with an underwriting answer in less than 45 days, they will be more impressed than if you told them less time up front.
- What type of medical exam is required?
It is normal for paramedical exam to be required for Disability Insurance. The exam is paid for by the insurance company and can be completed in your client’s home or at any other convenient location. The exam can take around 15 to 30 minutes and is conducted by a licensed nurse or medical doctor. An exam generally involves collecting physical measurements, including height and weight, a blood and urine specimen, blood pressure reading, and a series of different questions regarding your client’s medical history.
- What your client needs to know about the medical exam
1. What kind of medical questions will be asked?
The examiner will ask your client about medications, surgeries, treatments, and current or previous medical conditions. They will ask for the names and addresses of any doctors your client has seen in the last five to ten years. To speed up the process, your client will want to have this information handy. It is also important that your client answer health questions exactly how they are asked. If an underwriter wants to know something they will ask about it.
2. How can I best prepare my client for the exam?
Here are some recommendations you will want to make to your client regarding the paramed:
- It is best to schedule the exam in the morning.
- Get a good night's sleep the night before the exam.
- We suggest your client fast for 8 hours prior to the exam (the examiner will say 4 hours though)
- Abstain from alcoholic beverages for at least eight hours prior to the exam.
- If your client uses tobacco, do not smoke or chew tobacco for at least one hour prior to your examination.
- Avoid drinking coffee, tea, or caffeine for 12 hours prior to your exam.
- Limit salt intake and high cholesterol foods within 24 hours before your exam.
- You should not engage in extremely strenuous physical activities 24 hours before the exam.
- Be prepared to advise the paramed examiner of all medications they are taking.
- Have their physicians’ names, addresses, dates of past visits, names of any prescribed medications (dosage and frequency as well), and any information regarding injury and/or major illness during the previous five years.
- Drink a glass of water an hour or so before your appointment as this will help in obtaining a urine specimen.
- Can a previously completed paramed and labs be used in place of newly requested paramed and lab requirements?
Yes. However, underwriters always have the discretion to ask for your client to redo the paramed or labs. However, the results of the paramed and labs are usually good for around 6 months, as a rule of thumb.
- Is the application and underwriting process for Fully Underwritten coverage tough?
No. There are additional requirements than Simplified Issue but no more than any other type of coverage. As long as the advisor completes the application properly and sends it through The Ark Group for review and follow up, the overall process should be simple.
- What are a few of the quirks in Traditional Issue underwriting on Critical Insurance?
- Increased underwriting requirements
- Reinsurance Involvement in the underwriting process
- What are a few of the advantages to Fully Underwritten?
- Higher face amount availability
- An applicant who can’t qualify for simplified issue coverage, may qualify for Fully Underwritten
- More insurance carriers to choose from
- More covered Conditions
- Increased access to your client’s health history
- What determines the rate class my client will receive on their application?
In order to receive preferred rates, your client must be in excellent overall health, lead a healthy lifestyle and not participate in risky activities. Each company determines rate classes based on their unique underwriting requirements. Family health history, tobacco use of any type, a history of alcohol abuse or drug use will affect the rate class your client receives regardless of the insurance company. For underwriting questions regarding a particular client, please contact us for further assistance.
Claims:
- How do you file a claim?
The goal is to make the claims process as simple and easy as possible for your clients. Just have the client call you or someone call you on their behalf, as soon as reasonably possible after diagnosis and we will send you the necessary claims forms so you can help your client complete those forms. You will be responsible for submitting the claim forms to the Claims Department and for following up on the claim for your client.
- What information will be needed at the time of a claim?
For a Critical Insurance claim to be paid, the insurance company’s claims department will need evidence that your client has been diagnosed as having one of the covered critical illnesses. This evidence will normally come from a Qualified Medical Professional who is a specialist in the illness which has been diagnosed. Claimants may also be asked to undergo a further medical examination in order for the insurance company to ascertain more precise information about the nature of their condition. The costs for all medicals are paid the company concerned and will not be deducted from your client’s claim.
- How soon will a claim be paid?
A Critical Insurance claim pays a tax-free lump sum directly to the primary insured or the beneficiary, normally by check. The typical claim payment is paid within 2 to 3 weeks after the insurance carrier has verified that the claim is valid. The proceeds of an insurance claim are free of income and capital gains tax since the premium wasn’t deducted from your client’s taxes. The entire amount of their claim is available for them to spend in any way your client decides.
- What happens to your client’s policy if a partial benefit gets paid?
A partial benefit is paid when an In-Situ Cancer, Coronary Artery Bypass or Angioplasty is diagnosed and/or performed. Once this partial benefit is paid, the insured still has access to their remaining benefit should they get diagnosed with one of the other covered conditions. In some cases, the policy premium will decrease by the percentage of partial benefit paid. In other words, a 25% benefit payout would lower the premiums by 25%.
- If your client dies as a result of a covered illness, will their policy still pay benefits?
If an insured dies as a result of a covered condition, the full face amount of the policy will be payable to their beneficiaries.
- Is your client allowed to continue working after a Critical Insurance claim?
Once your client receives their claim, the insurance company has no interest how they live their life or what type of treatments they seek going forward. The cash is theirs to spend how they like…which allows them go on to living life how they like. It may be useful for you to know that:
- 35% of men and 46% of women who develop cancer survive at least 5 years but at a large financial cost
- 1 in 5 men and 1 in 6 women will suffer a Critical Illness before their normal retirement age
Can your client make multiple claims on their Critical Insurance policy?
Yes. Some policies continue to provide coverage after your client has made a claim. Additional claims can be made:
- On totally unrelated illnesses
- For a limited amount of conditions, policy holders may only be able to claim more than once (depends on the insurance carrier and their particular policy).
- What happens if a person needs to submit a second claim?
If the original claim was a partial benefit payout, then the remaining coverage will stay in place until there is a need to make another claim. Some policies will pay multiple, full benefit payouts…which means if an insured’s illness is cured but comes back again or even if a completely different illness develops, there is an ability to claim again.
- What happens if the illness improves after making a claim on a Critical Insurance policy?
Congratulations! Since your client has already received their benefit, and depending on the policy, they would continue paying their premiums in case of a second diagnosis at a later date.
- Will your client still be covered if they move away from the US?
In most cases, Critical Insurance policies are portable; provided the insured was a resident of US at the time their policy was issued. However, the diagnosis must come from an American Board Certified Medical Professional and the insurance company reserves the right to request additional medical requirements to support the diagnosis and that could include your client coming to the US to undergo a physical evaluation.
- What happens if your client suffers a critical illness while traveling outside of the US?
The claims process is handled the same way in this case as if they were diagnosed in the US. All claims must be verified as valid by the Claims Department prior to getting paid. It would be wise to make sure your client gets a copy of all their medical records while being treated abroad.
- Will Critical Insurance policies permit the use of alternative medicines?
After being diagnosed with a qualifying condition listed on the policy and the claim has been paid, an insured can spend their money however they see fit. So, if they want to spend some of all of their money on alternative medicines, then that is entirely their choice.
- My question is not listed, who do I contact at The Ark Group?
If you have already reviewed our list of the most Commonly Asked Questions and you did not find the answer you were looking for, please contact us. Our agency is open from 8:30am to 5:30pm CST Monday through Thursday and 8:30am to 4pm CST on Fridays.
Contact Information:
The Ark Group
1055 N. 115th St, Ste 200
Omaha, NE 68154
Toll Free: 866-725-0777
Local: 402-884-4777
Fax: 402-881-8337
