There are some insurance products where the devil is in details. One such product is critical illness insurance. We are focusing on this today given its recent media publicity.
(Story abridged from a Global News article)
Bianca Williams needs chemotherapy, radiation and a bone marrow transplant, but TD Bank insurance has denied her critical insurance claim.
“We thought at least with this coverage, we’d be able to provide for our family,” said Williams, a 29-year-old public health nurse in Durham. “[But] I’ll eventually get an infection I can’t fight.”
In September she was diagnosed with two conditions: aplastic anemia, a form of bone marrow failure, as well as paroxysmal nocturnal hemoglobinuria — or PNH — which affects young adults.
Williams said her doctors regard the conditions as extremely serious, and they wrote letters supporting this opinion. When Williams applied to make use of her benefits, however, TD refused to make any payments whatsoever.
In a denial letter reviewed by Global News, a TD Life Insurance Company claims specialist wrote to advise Williams that her claim didn’t meet the criteria of a “critical illness” under its policy.
“Cancer (life-threatening) means a life threatening tumour characterized by the uncontrollable growth and spread of malignant cells,” the letter read. Neither of Williams’s conditions are cancer.
When the policy was sold, the TD Bank sales representative assured Williams and her husband that they’d be covered if they had a serious condition that prevented them from earning an income, but the representaive didn’t provide a list of conditions that were covered or exempt.
“At the time I had [critical illness] insurance through another provider. They said this was the same or better,” said William’s husband.
When Bianca is well enough to receive a bone marrow transplant, doctors have told her she likely won’t be able go back to work for a year or longer. She doesn’t qualify for short-term or long-term disability benefits through her employer. The insurance, which costs the couple about $2,000/year, was intended to provide for an unforeseen situation like this.
“The customer asked us to review their claims decision, and our review is ongoing…” informed Crystal Jongeward, manager of corporate and public affairs for TD Bank Group.
This tragic story highlights the importance of both the insurance agent and the client understanding what a critical illness policy covers, and what it does not.
We asked Richard Parkinson, an insurance expert for Critical Illness Insurance to comment on the story above and it appears that the critical illness insurance provider seems to have failed in several aspects:
The information on the website and insurance certificate reveal that only a limited subset of critical illnesses are covered, but not the pre-condition that Bianca Williams has faced.
| The Critical Illness Recovery Plan from TD Insurance | Critical Illness via Mortgage Insurance from TD Insurance |
| Cancer, heart attack and stroke are the three most common critical illnesses. If you’re diagnosed with one of these conditions you may not be able to work. The Critical Illness Recovery Plan2 can help support you during these times. Receive tax-free cash benefits up to $50,000 when diagnosed with cancer (life threatening), heart attack or stroke. | Mortgage critical illness insurance can pay off your mortgage, if you are diagnosed with: Cancer (life threatening); Acute Heart Attack; or Stroke. |
Thus, both critical illness insurance products shown above (from TD Insurance) cover only the three most frequent critical illnesses, but leave the customer unprotected in the case of a rarer health condition. It is the job of a licensed insurance agent to disclose the covered conditions to customers in a clear and understandable way. It appears that either this was not done in this case, or the advisor was not a licensed insurance agent or both.
It is not enough just to cover a particular critical illness. One should also be very clear about the amount of existing coverage. If we look at the TD Insurance from before we see the following:
| The Critical Illness Recovery Plan from TD Insurance | Critical Illness via Mortgage Insurance from TD Insurance |
| Receive tax-free cash benefits up to $50,000 when diagnosed with cancer (life threatening), heart attack or stroke | Mortgage critical illness insurance can pay off your mortgage. |
Both products have existing hooks – the first plan does not offer any coverage beyond $50,000 which, in many cases might not be enough. Imagine the need to go through complex medical treatment but also still support your family, especially if you are the principal breadwinner.
The second plan, mortgage critical illness insurance, only covers the outstanding mortgage amount, not any other expenses you might have. The only guarantee you are getting when buying mortgage insurance is that your home will not be collected by a bank, should you be diagnosed with a critical illness named in their policy. There are better ways to protect yourself. We will get back to that very shortly – sit tight.
Often banks oversell their offering be it with credit cards where travel insurance protection comes with a bunch of limitations and restrictions or with credit insurance such as the case of mortgage critical illness insurance.
It is sad to see that often a combination of an attractive price and simplified/reduced coverage results in higher sales for the banks – at the cost of agents being under-equipped with knowledge and the understanding necessary to explain all the risks to their clients.
The situation above appears to be a classic case of the advisor not understanding the critical illness plan they offered, and more importantly, not being explicit with the client about what is covered and what is not.
Clearly, if this had been explained to the client, they would have realized they do not have a claim based on the contract, and if this were to go to court, it would be hard to win this case. Their only hope is that TD Insurance will decide to pay on the basis of misrepresentation by the financial planner at the bank.
It also highlights the importance of speaking with a licensed insurance advisor/broker who will take the time to explain the contract, and what is covered and what is not.
Here are examples of many other plans that insurance brokers have access to which cover more complex conditions.
Compare illness definitions for critical illness plans from various companies
New definitions based on 2015 CLHIA agreement
| Manulife | Canada Life | Industrial Alliance | Sun Life | RBC Insurance | Desjardins |
| Not offered | acquired brain injury | Not offered | acquired brain injury | acquired brain injury | acquired brain injury |
| aortic surgery | aortic surgery | aortic surgery | aortic surgery | aortic surgery | aortic surgery |
| aplastic anaemia | aplastic anaemia | aplastic anaemia | aplastic anaemia | aplastic anaemia | aplastic anaemia |
| bacterial meningitis | bacterial meningitis | bacterial meningitis | bacterial meningitis | bacterial meningitis | bacterial meningitis |
| benign brain tumor | benign brain tumor | benign brain tumor | benign brain tumor | benign brain tumor | benign brain tumor |
| blindness | blindness | blindness | blindness | blindness | blindness |
| cancer (life threatening) | cancer (life threatening) | cancer (life threatening) | cancer (life threatening) | cancer (life threatening) | cancer (life threatening) |
| coma | coma | coma | coma | coma | coma |
| coronary artery bypass surgery | coronary artery bypass surgery | coronary artery bypass surgery | coronary artery bypass surgery | coronary artery bypass surgery | coronary artery bypass surgery |
| deafness | deafness | deafness | deafness | deafness | deafness |
| dementia including Alzheimer’s | dementia including Alzheimer’s | dementia including Alzheimer’s | dementia including Alzheimer’s | dementia including Alzheimer’s | Alzheimer’s |
| heart attack | heart attack | heart attack | heart attack | heart attack | heart attack |
| heart valve replacement or repair | heart valve replacement or repair | heart valve replacement or repair | heart valve replacement or repair | heart valve replacement or repair | heart valve replacement or repair |
| kidney failure | kidney failure | kidney failure | kidney failure | kidney failure | kidney failure |
| loss of limbs | loss of limbs | loss of limbs | loss of limbs | loss of limbs | loss of limbs |
| loss of speech | loss of speech | loss of speech | loss of speech | loss of speech | loss of speech |
| major organ failure (or on waiting list) | major organ failure (or on waiting list) | major organ failure (or on waiting list) | major organ failure (or on waiting list) | major organ failure (or on waiting list) | major organ failure (or on waiting list) |
| major organ transplant | major organ transplant | major organ transplant | major organ transplant | major organ transplant | major organ transplant |
| motor neuron disease | motor neuron disease | motor neuron disease | motor neuron disease | motor neuron disease | motor neuron disease |
| multiple sclerosis | multiple sclerosis | multiple sclerosis | multiple sclerosis | multiple sclerosis | multiple sclerosis |
| Occupational HIV infection | Occupational HIV infection | Occupational HIV infection | Occupational HIV infection | Occupational HIV infection | Occupational HIV infection |
| paralysis | paralysis | paralysis | paralysis | paralysis | paralysis |
| Parkinson’s disease and specified atypical Parkinsonian disorders | Parkinson’s disease and specified atypical Parkinsonian disorders | Parkinson’s disease and specified atypical Parkinsonian disorders | Parkinson’s disease and specified atypical Parkinsonian disorders | Parkinson’s disease and specified atypical Parkinsonian disorders | Parkinson’s disease and specified atypical Parkinsonian disorders |
| severe burns | severe burns | severe burns | severe burns | severe burns | severe burns |
| stroke | stroke | stroke | stroke | stroke | stroke |
| Early Intevention Benefit for cancers | partial payout for all forms of cancers | Prevention + Benefit for cancers | not available | Early Assistence Benefit | partial payout for all forms of cancers |
| living care benefit | Loss of Independent Existence | Loss of Independent Existence | Loss of Independent Existence | Loss of Independent Existence | Loss of Independent Existence |
The insurance coverages from these providers show that they cover cases of aplastic anemia, one of the health pre-conditions discussed above. Such detailed coverage, though, may come with a cost.
How much would a more inclusive policy cost?
That old adage, “you get what you pay for” applies here. Below is a comparison of several plans based on what a female aged 29 would pay for $300,000 of very comprehensive critical illness insurance coverage.
| TD Insurance Critical Illness Insurance (not covering the condition above) | Manulife Term 20 LifeCheque Critical Illness (to cover the condition mentioned above) | Manulife Term 20 LifeCheque Critical Illness (to cover the condition mentioned above until the age of 75) |
| $33/month | $94/month | $171/month |
If you have any questions regarding critical illness insurance, our specialists, who have experience with numerous plans and insurers, are happy to provide you with a tailored critical illness insurance quote and answer all your questions.
Excellent article. Thank you for posting!
The article points at several “facts of life” in the insurance world, including:
Insurance is a legal contract between the policy buyer and the insurance company who authors and issues the contract. In “insurance on the person” such as life insurance, critical illness insurance, disability insurance, long-term-care insurance, etc. the buyer is often, but not necessarily, the life insured. Being a legal contract it is the contract wording that governs and is relied upon.
*** Fact to keep in mind: Insurance on the person contracts have wordings that differ – and often quite substantially – as illustrated in the case cited in the article. Even “term” life insurance – more appropriately described as “term death insurance” – contracts may and do differ, and sometimes quite substantially. Moral: DEMAND a copy of the full and complete insurance contract before making a commitment to pay for it, then READ the insurance contract, and ask any question that you may have. Remember: No question is “stupid” other than the question that should have been asked but wasn’t. If the seller declines to provide you with a copy of the contract, find someone else to deal with. ***
Buying “insurance on the person” online and without consultation with a licensed professional may be (and could be) as risky as trying to learn how to swim by correspondence online or on the phone). Moreover, “insurance on the person” that is pitched for purchase online or by phone only without the involvement of an independent advisor is likely of lesser value per dollar of premium cost. The marketers of “insurance on the person” who market exclusively online or just on the phone without the involvement of an independent advisor often rely on the “numbers game” – ‘throw as much mud on the wall as possible; some will stick’ , sometimes to the extent that would fit the proverb “there’s a sucker born every day”.
Unlike gasoline where the pricing is often “fixed” among the competitors, the insurance market is a highly competitive market. If the insurance company which offers the “insurance on the person” contract believes that their value and pricing is competitive, they look forward to including the offering on LifeGuide – Canada’s leading and most comprehensive and objective independent “insurance on the person” market research, quotation software and data service. Conversely, if the insurance company questions the competitiveness of its offering in terms of either or both qualitative and quantitative value, there is a tendency to stonewall on requests to include such an offering for independent, objective and consumer-interest focused comparisons. In the latter, where the insurance company questions the competitive standing of its offering, it may rely either on high commission incentives to sales persons – along with or without “Multi-Level-Marketing” schemes or on the “numbers game” of exclusive online and/or telemarketing channels. LifeGuide includes the widest array, with over 2,400 “insurance on the person” offerings and permutations thereof, and from the largest number of insurance companies. Since the information in LifeGuide is sourced directly and in cooperation with the respective insurance companies, it is reasonable to expect that the product offerings in LifeGuide include those that the insurance companies themselves consider to be highly competitive in both quantitative and qualitative value.
As the article appropriately states: “That old adage, “you get what you pay for” applies here.”, as it almost always does.
Thanks for sharing your insights Ami