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From - 19/04/23
Critical Illness InsuranceSell Less in Order to Sell More
Objections to Buying Critical Illness
Useless Product?
Don’t need it!
Expensive
Difficult to Underwrite
Other Needs come first
Sold as Life Insurance but it is not!!
Industry Sales (a little history…)
Bank is largest seller of CI in Canada – in excess of $300,000,000 in premium
Brokers sell about $80 million
Bank coverage is for debt only, must purchase life insurance first and only covers Cancer, Heart Attack and Stroke
Bank coverage underwritten at time of claim
Let’s Get Critical………..
“Critical” – extremely ill and risk of death
Need for money to provide expensive but necessary medical care
Modern medicine continually eroding the “extreme” aspect of many illnesses
People not only stay healthier longer but when ill, they get healthy earlier and more often
Let’s Get Critical………..
Today’s coverages go further e.g. – deafness, blindness, loss of
speech
Critical Illness / Significant Illness coverage
Let’s Get Critical…..
47% of foreclosures due to owners suffering serious medical problems
Only 3% lose homes due to death 2/3 of costs associated with cancer not
covered by health insurance
Let’s Get Critical….
Previous statistics are for United States – likely not applicable to Canada
In Canada, does need for additional monies still exist?
Let’s Get Critical…..
Home care, transportation, drug insurance co-payments, child care, parking, home renovations, lost wages/bonuses (spouse too), health equipment, recuperation away from home, home maintenance
Amounts may be small individually but collectively they add up
Once savings are depleted, it may be difficult to replenish if client is middle-aged
Let’s Get Critical…..
Critical Illness Insurance is a good thing!
But how much of a good thing? Average face amount 2003 - $101,000 Average premium - $935
CI calculators include mortgage payoff and long term income needs
If recovery imminent, is the emphasis on significant long term amounts necessary?
Let’s Get Critical…..
Important to understand client’s total financial position e.g.:
2 wage earners mid ‘40s, earning $60k - $90K total, at least one with a drug plan; perhaps both with some disability plan
Mortgage and children to educate Want to keep retirement savings intact
One-half to one times earnings could be sufficient in this situation; or
2 years of mortgage payments
Extreme Disability Benefit – CI “Booster”
Contractual obligation in most AXA life contracts
Pays one-half the death benefit, to a maximum of $250K, when the life insured cannot perform 5 of the 7 ADL’s
Tax free benefit
Elimination period is 6 months
Benefit paid if disability occurs < age 60
Benefits to your clients – Extreme Disability Benefit
Pays when your client needs money the most
Provides client with:
- financial security
- options
- control
- choice
Example…..(40 yr. MNS)
$250,000 T-10 Life Insurance
$100,000 T-10 Critical Illness (enhanced)
Company A - $894
Company B - $919
Example…..(40 yr. MNS)
AXA - $850 $100,000 Critical Illness
$125,000 EDB
Potential Payout*: $225,000
$610 $ 50,000 Critical Illness
$125,000 EDB
Potential Payout*: $175,000 *in the event of an extreme disability
RRSPs or Critical Illness Insurance?!?!
Designed for retirement use but RRSPs often client’s only savings
Taxable upon withdrawal (spousal contributions governed by 3 year rule)
Financial plans based on compounding of interest i.e. time money is growing
RRSPs or Critical Illness Insurance
Contribute less to RRSP and purchase CI with ROP benefit
Ensures that RRSP remains intact in event of Critical Illness
Minimal effect on retirement income
RRSPs or Critical Illness
Husband and wife, aged 40 and 38
Family income of $75,000 annually
2 children, own home
RRSP savings currently of $20,000 and plan to contribute $3,000 per year
RRSPs or Critical Illness
RRSPs grow to $348,349 @ 6%
Alternative – Buy $25,000 CI with ROP on 40 year old at $476 annually
RRSP grows to $309,436 and there is a $14,295 ROP
$24,700 difference in first year of RRIF could have generated approx. $100 per month, before taxes @ age 69
RRSPs or Critical Illness
If illness strikes and RRSP savings used, RRSP only grows to $194,000 at age 69
CI monthly payment results in minimum income drop to ensure retirement income plan stays in place
Underwriting
Amounts under $100,000 do not require additional u/w requirements (under age 50)
Include letter describing any particulars (recent doctor visits, “unusual” family history)
Use Family History Table to pre-screen
Automatic $100,000 offer when Class 1 T-10 issued
How Much is Enough?
Pay mortgage for 2 years (45 MNS; >$1 per day for $1,000 monthly mtge.)
Salary for ½ year?
Salary for 1 year?
Salary for 2 Years?
……. In after-tax dollars
Appeal to emotion – e.g. fear of Breast Cancer
Objections to Buying Critical Illness
Useless Product?
Don’t need it!
Expensive
Difficult to Underwrite
Other Needs Come First
Make CI Part of Your Plan
Critical Illness insurance promoted to assist client against suffering financial ruin
We insure against catastrophe but most definitions cover “significant” illnesses
Covering costs associated with 1 – 2 years expenses should make coverage affordable to most
Consider Basic CI when cost an issue
Combine CI with EDB and Fracture for maximum protection and best value
From - 19/04/23
AXA supports advisors who practice
needs based selling
AXA’s commitment to advisors
Enhanced compensation on T10, T20 and T70 products: Now 50% FYC + Bonus
Life insurance rates that are competitive in today’s market
Competitive product designs, features & tools
Remember…
Extreme Disability Benefit: A powerful and unique feature included in most of AXA’s life insurance contracts
AXA’s commitment to advisors
LifeBeat: Innovative critical Illness protection combined with LTC coverage
All-in-one easy to understand product
22 illnesses and coverages
Enhanced compensation on LifeBeat:
T10 45% FYC, T70 55% FYC + Bonus
