Reduce your risks and improve your returns Part 4 By Perrii Muthuraman

This is the concluding part of the series of ideas on Insurance. If you have not read part 1, part 2 or part 3, you would like to go through them also. Certainly, we did not cover all the ideas. These are some general ideas only. For your particular situation, you are welcome to contact the author.

Let me ask you a question. What happens to your cash flow, when you have difficult times? Usually, your income shrinks and expenses rise. Right?

How do you manage such a situation?

Either you deplete your savings, or you borrow if you don’t have any savings. Right?

Neither is a good solution. Here are better solutions for some difficult situations to take care of your cash flow and finance in general.

  • Critical illness insurance for life-threatening conditions like heart attack, cancer, stroke, etc
  • Disability insurance when you are unable to work and earn
  • Long term care insurance when you face issues associated with old age

Critical illness insurance provides a lump sum payment; disability insurance provides cash flow and replaces a portion of the earned income. Disability insurance will cover your ordinary living expenses, whereas critical illness insurance will cover the extraordinary expenses that aren’t part of your day-to-day life. While disability insurance is tied to your ability to work, critical illness insurance is not. Disability insurance is like having brakes on a car, whereas critical illness insurance is more like the airbags.

As regards to long term insurance, there are two types.

  1. One reimburses you for eligible expenses you incur on a given day, up to a pre-set maximum.
  2. The other type of long-term care (LTC) insurance is the income-style plan, which is more flexible. It offers the income when you require the care, without having to prove you had expenses.

You can have plain insurances for or a combination of one or more types. Under critical illness, you can even get back all the premiums paid if you have not been affected by the critical illnesses during the tenure of the policy.

Just imagine this with me. You put some money periodically with your bank’s saving account or chequing account for several years. How much interest will you get for this? Practically nothing. On the other hand, when you put the money in critical illness insurance, you can either have a huge insurance if you are affected by any of the defined critical illnesses; or you can get back refund of all your premiums, for healthy living, on maturity/death. The main difference is, money is locked for a certain number of years under the insurance type of saving, but it is not the case with the bank. But if you look at the benefit, critical illness offers a huge insurance benefit with the return of premium option, whereas the money put into the bank’s saving or chequing account offers practically nothing. Right?

To know more or to review your current portfolio without any obligation or simply just to have a second opinion, you can contact the author at 416 473 6100 or email:


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