Research conducted by Manulife Financial reveals that many consumers remain unfamiliar with Critical Illness Insurance. As a result, there has been a great deal of misunderstanding concerning the uses and benefits of this type of coverage.

Many consumers feel that Disability Insurance offers them adequate protection in the event of a critical illness. This misconception has its roots in confusion regarding the difference between Critical Illness Insurance (CI) and Long Term Disability Insurance (LTD).

While there are similarities between these two types of coverage, CI and LTD address entirely different needs, and each is most appropriate in the circumstances it was designed for. Knowing the specific reasons for CI and how it differs from LTD, can help you avoid a costly mistake that may affect your family's financial security.

Understanding Long Term Disability Insurance

LTD usually pays a regular monthly benefit to an insured individual who can no longer perform the normal duties of their work because they have suffered a disability. The amount of the monthly benefit is typically a percentage (often 67%) of the insured individual's monthly earned income before becoming disabled. Before benefits will be paid, a doctor's diagnosis must confirm the disability and the insured individual must complete the waiting period, typically 90-120 days from the onset of the disability, depending on the policy. It's very likely, for example, in the case of a mild heart attack, an individual may never satisfy the waiting period and therefore may never receive any benefits. LTD is commonly made available to people through their group employee plan at work or as individual policies set up with a benefits broker.

Understanding Critical Illness Insurance

CI usually pays a one-time lump sum benefit to an insured individual suffering from one of 23 critical illnesses covered under the policy. These illnesses typically include cancer, heart attack, stroke, Alzheimer's, Parkinson's, multiple sclerosis. Before benefits will be paid, a doctor's diagnosis must confirm the condition, and the insured individual must complete the survival period, usually 30 days from the incident diagnosis. No disability, permanent or otherwise, is required to qualify for a CI benefit.

The advantage of a CI insurance policy is that it provides cash up front, to be used for anything that the insured individual chooses. These uses can range from paying for the many indirect expenses of coping with the illness, to pursuing treatments and therapies, beyond the scope of our over-burdened provincial health care system.

According to the May 20, 2002 edition of National Underwriter, two thirds of the costs to cancer patients relating to their illness in 2000 were for indirect expenses. These expenses, totaling $77 billion, included nursing care, medical care, day to day living expenses, travel to receive treatment, home health care, child care and other expenses not covered by provincial or private health plans.

Expenses such as these can strain a family's finances and quickly deplete their savings. A CI insurance policy helps relieve this financial strain. It provides the insured individual with a much-needed measure of security during a trying time so they can focus on recovering, free from worries about paying for additional medical or family expenses.

Here is a handy table which illustrates some of the key differences between Long Term Disability Insurance and Critical Illness Insurance:

Long Term Disability	Critical Illness Insurance
Can replace a portion of your lost income	Can pay a lump sum to be used as you choose
Requires ongoing proof of loss of income to continue receiving payments	No ongoing proof is required
Benefit payments cease once an income is earned	Benefit is not affected by other income
Benefit is limited to a percentage of pre-disability income	Benefit is the full amount of the policy