sun-life-help-grandparents-leave-legacy-protection-cii

For many clients, being a grandparent is a time of great joy. They delight in seeing their family grow and being part of their grandchildren’s lives. But they also know that life’s unpredictable and they could have some concerns:

  • What does the future hold for my children and grandchildren?
  • How would they cope during difficult times, such as developing a serious illness?
  • How can I help protect them?

For clients asking these kinds of questions, the answer may be critical illness insurance (CII) for children, a solution that offers lifelong benefits and the opportunity to share a legacy during their lifetime.

When a child gets sick

A critical illness can have devastating consequences — physical, emotional and financial — and CII can help. Essentially, when illness strikes, CII for adults eases both the financial and emotional strain. So does CII for children. When a child insured by a CII policy is diagnosed with a covered illness and survives the waiting period, the policy owner receives a lump sum payment that can be put toward medical and other costs that could, otherwise, pose big financial problems.

The 2013 Action Table on Family Caregiving Report published by the Canadian Cancer Action Network (CCAN) confirms that in 2012, 28 per cent of Canadians who cared for a critically ill child experienced financial difficulties.1

Did you know?

In Ontario, families of children with cancer incur an average of more than $28,000 in costs in the first three months following a child’s diagnosis.

Source: Tsimicalis, A. Costs Incurred by Families of Children Newly Diagnosed with Cancer in Ontario. University of Toronto, 2010.

Drug and travel expenses can be particularly steep:

  • About 75 per cent of newer cancer drugs taken at home cost more than $20,000 and the average cost of a single course of treatment is $65,0002 — and as medicine continues to advance, many health-care costs will keep climbing. Government and personal health plans may cover some but not all of them, creating a financial burden beyond many families’ means.
  • In a six-month period following their daughter’s diagnosis of Hodgkin’s lymphoma, a rural Manitoba family made 22 trips to Winnipeg and four trips to Brandon for the required treatment. During that time, they spent approximately $12,000 on gas, parking, accommodation and meals.3

Complicating matters is the potential loss of income. Parents of critically ill children often need time off work to accommodate treatments and hospital stays. Some opt for reduced work hours; others must quit their jobs entirely, resulting in less money to pay mounting debt. In fact, the Pediatric Oncology Group of Ontario indicates that families can lose up to one-third of their pre-diagnosis, after-tax income while a child is in treatment.4

That’s where CII for children comes in. By easing the economic burden of serious childhood illness, families can focus on their child’s recovery versus how they’ll pay the bills. In addition to coverage for illnesses such as cancer, stroke and acquired brain injury, child CII plans often cover childhood conditions such as cerebral palsy, congenital heart disease, cystic fibrosis, muscular dystrophy and type 1 diabetes mellitus.

CII may also give clients access to value-added benefits such as Best Doctors® services. Best Doctors is an international physician network that helps families better understand a child’s medical condition and treatment options. When facing the uncertainty of a serious illness, Best Doctors provides a range of services to help secure the right information, the right diagnosis and the right treatment.

Did you know?

By purchasing child CII, grandparents can help their grandchildren:

  • lock in premiums while they’re young, and
  • guarantee their future insurability.

When a child grows up

As children grow, some CII policies can continue into adulthood, which is why some clients may want to incorporate child CII into their legacy plans. Consider this example in which the long-term care conversion option and the return of premium on cancellation (or expiry) option help a Sun CII child policy become a lifetime gift.

  • When George and Sheila’s granddaughter, Sarah, is 5 years old, they purchase a Sun CII policy for her with $100,000 coverage until age 75 (T75). They include the return of premium option, which means they’ll get some of their premiums back if Sarah remains healthy throughout her childhood. Because of Sarah’s young age, George and Sheila’s monthly premium is just $63. This premium will stay the same for the life of the policy (assuming Sarah provides a non-smoker declaration at age 18).
  • Sarah enjoys a healthy childhood.
  • On Sarah’s 18th birthday, George and Sheila apply to add the long-term care conversion option to her CII policy. For a small additional amount of premium, this gives Sarah the ability to convert her critical illness coverage to long term care insurance (LTCI) when she’s older.
  • When Sarah turns 25, because of the return of premium option, her grandparents are automatically refunded 75 per cent of the eligible premiums they paid (which comes to $11,291). They give this money to Sarah to help with the down payment on her first home. At this time, George and Sheila also transfer ownership of the policy to Sarah. Sarah assumes the monthly premium and maintains $100,000 of CII.
  • At 40, Sarah can choose to continue her coverage or cancel it and receive the accumulated return of premium on cancellation benefit of $15,055. If she maintains her coverage until age 60, the return of premium benefit would be $30,110.
  • Between ages 60 and 65, Sarah can choose to keep her coverage until it expires at age 75 or convert all or a portion of it to a lifetime LTCI solution, using some or all of her return of premium benefit to help pay for this new coverage.

Lifetime coverage: how it works

By purchasing Sun CII for Sarah when she’s young, George and Sheila provide a gift that will protect Sarah throughout her life. She has CII to provide financial resources in case of a serious illness, an opportunity to get some of the premiums back and LTCI to help with the care she’ll need as she ages. George and Sheila leave a special legacy of protection for their granddaughter.

Additional considerations

Sun CII for children offers many benefits. It also involves certain provisions that clients should know about, pre-purchase. Among the main points to share with clients considering Sun CII for their grandchildren are:

Automatic return of premium on cancellation (or expiry) – Automatic ROPC(E) – This option (as shown in the example featuring George, Sheila and Sarah) is well worth exploring. The automatic ROPC(E) is available when clients choose to pay premiums for the life of the policy. And for clients who choose to pay premiums for 10 or 15 years and cancel the policy on or after the policy anniversary nearest the child’s 35th birthday, a different ROPC(E) benefit is available.

Ownership rules – Parents, legal guardians and grandparents can all purchase Sun CII policies for children. When a grandparent who’s not the child’s legal guardian purchases the plan:

  • The benefit payee must be the parent or legal guardian.
  • All siblings from a family must be insured for a similar amount. Similar can mean the same amount of premium, the same face amount or the maximum CII for their age for each child.

Did you know?

When CII policy ownership is transferred from a grandparent to the parent or grandchild, there are no tax consequences.*

*There are no provisions in the Income Tax Act that tax the transfer of a non-life insurance policy between family members. Since the CII policy is being transferred to an adult child, the attribution rules don’t need to be considered.

Learn more about Sun CII and talk with your clients about protecting their grandchildren and leaving them a valuable legacy.

Originally published on Advisor.ca