Is it Worth Getting Critical Illness Insurance?

Is critical illness insurance worth it in Canada?

Yes, having critical illness insurance is worth it in Canada! It helps insured individuals during difficult times by paying them a lump sum benefit amount that is non-taxable. Canadians who have a critical illness insurance policy can utilize this payout for their treatment or other expenses and focus on complete recovery.

What is critical illness insurance?

Critical illness insurance is an agreement you make with an insurance provider that they will pay you a lump-sum benefit if you develop a life-threatening illness. Critical illnesses usually require a long and expensive treatment plan.

The payout can help individuals receive the best healthcare facility to proceed with their treatment. Additionally, it may also serve as an income backup in case the individual needs to take some time off work.

Here are some of the key features of critical illness insurance:

• A one-time payment that is given regardless of any other health insurance policy
• Coverage against 26 critical ailments, including heart attack, cancer, stroke, kidney failure, organ transplants, and more
• Provision of additional coverage for diseases such as Alzheimer’s disease, severe burns, multiple sclerosis, etc
• Critical illness insurance usually has a waiting period—a predefined duration during which you can’t make any claims 
• Critical illness insurance is a living benefit—you will get the payout while you are alive and undergoing treatment

Why is critical illness insurance coverage worth it?

Critical illness insurance is worth the cost of monthly premiums because it’s very likely that you will be payed out for your policy. In fact, over 80% of critical illness insurance policies are paid out, and that number is growing. Because this type of insurance coverage can include a variety of illnesses, chances are, you’ll have to make a claim. That means it’s worth your money.

Let’s take a look at some stats.

Critical illness insurance statistics

What does critical illness insurance cover?

Critical illness insurance in Canada covers close to 26 diseases that require immediate medical intervention and management. 

Here are a few prominent diseases covered by critical illness insurance:

• Heart attack
• Stroke
• Cancers
• Aortic surgery
• Coronary artery bypass surgery
• Major organ transplant
• Major organ failure on a waiting list
• Occupational HIV infection
• Kidney failure
• Aplastic anemia
• Acquired brain injury
• Benign brain tumor
• Dementia (including Alzheimer’s disease)
• Bacterial meningitis
• Motor neuron disease
• Multiple sclerosis
• Parkinson’s disease
• Loss of limbs
• Paralysis
• Severe burns

Advantages of critical illness insurance coverage

Critical illness insurance comes with many advantages as an insurance product beyond the high rate of payout.

• Flexibility in how benefit is used
• Premiums can be returned if there are no claims (return of premium rider)
• Ability to get coverage as a rider or separate policy
• Ability to convert to permanent coverage

Disadvantages of critical illness insurance coverage

While critical illness insurance is a great product, there are some aspects that some may find negative.

• More expensive than life insurance
• More stringent underwriting guidelines
• Strict claims process (you must have an official diagnosis, which may take time)

Factors influencing the cost of critical illness in Canada

Several factors influence the cost of critical illness insurance in Canada. Take a look at some of the most prominent ones:

• Age: Premiums increase with age as the risk of developing a critical illness rises
• Health status: Pre-existing conditions or a history of illness can lead to higher premiums or coverage denial
• Coverage amount: Higher coverage amounts lead to more expensive premiums
• Policy Term: Longer policy terms often result in higher costs
• Smoking status: Smokers typically face higher premiums due to increased health risks
• Occupation and lifestyle: High-risk occupations or unhealthy lifestyle choices can elevate premiums

Family medical history: A family history of critical illnesses can also raise premium costs

Do you need critical illness insurance cover?

Regardless of any disadvantages of the product, the rate at which you are likely to get paid out for this policy makes this policy worth it—it’s a very low-risk gamble compared to other insurance products. Critical illness insurance provides a different type of peace-of-mind than other insurance categories like term life or whole life insurance.

If you worry about your quality of life after a health scare, how a sickness could affect your family’s financial well-being, or having to work through an illness thus delaying or hampering your recovery, then critical illness can definitely be considered worth it.

Which is better life insurance or critical illness?

Life insurance and critical illness insurance are completely different insurance products that serve different purposes.

• Life insurance: pays out a death benefit to your beneficiaries when you pass away
• Critical illness insurance: pays out a benefit to you (the policyholder) if you are diagnosed with a critical illness

In the context of permanent (or whole life) coverage, permanent life insurance is more of a guaranteed product than critical illness, because one day you will pass away, but you may not necessarily be diagnosed with a critical illness. But that doesn’t make it a better product than critical illness insurance.

Both policies are important to have when considering the financial future of your family. Critical illness insurance will financially support your family if you are recovering where as life insurance will take care of your family if you have passed away.

Do I need both income protection and critical illness cover?

Income protection and critical illness insurance cover are two different insurance products that have different purposes.

• Income loss protection or job loss insurance: pays out a benefit if you lose your job
• Critical illness insurance: pays out a benefit to you (the policyholder) if you are diagnosed with a critical illness
• Disability insurance: replaces a portion of your income if you are sick or injured and cannot work for a short or long period of time (depending on the policy). This is different from job loss insurance as you are only temporarily off work.

Disability insurance will replace your income while you’re off work due to a critical illness, whereas critical illness insurance will pay you a one-time lump sum payment when you are diagnosed with that illness. We recommend both products to ensure your full financial security during your recovery period.

What to look for in a critical illness insurance policy

Every person has unique financial needs and goals. When selecting a critical illness policy and deciding if its worth it for your family, you should consider what your ideal financial outcomes are.

To give you a better idea of how to select the best critical illness insurance policy, here’s is a breakdown of policy benefits you should look for:

Several Canadian insurance providers offer different types of critical insurance policies. Each of these policies has its own merits and drawbacks. PolicyAdvisor has reviewed all the major critical illness insurance offerings in Canada. In doing so, we come up with a list of features, details, and options Canadians should look for when shopping for their own critical illness coverage.

It may be the case that every feature is available in one policy, but with the help of an experienced insurance broker, you can find the coverage that is best for you.

Is it worth paying for critical illness insurance?

Yes, in general, it is worth it to buy critical illness insurance. The coverage starts from as low as $20 per month, but it and may go up to as high as a few hundred dollars a month. If you’re worried about it not being worthwhile, you may consider purchasing a return of premium rider. This rider will return your premiums back to you if no claim was made during the policy term or at death if no claims were made during the policyholder’s life.

The bottomline is, if you can’t afford the monthly premium, it is not worth it. But if you can, then this insurance is well-worth the monthly premium. You already know the likelihood of being diagnosed with a critical illness in your lifetime (80%), so it is worth it to make sure you will at least be financially secure while you recover.

In Canada, the average life expectancy is 83 years. Healthcare is world-class. Apart from healthcare facilities, there are renowned lab and research facilities. Despite having all this, one can not deny the toll that lengthy treatment takes on one’s financial condition.

Recovery from life-threatening diseases is also often about care and facilities being made available for a longer than normal period. Critical illness insurance is worth its money in cases like these where one does not need to put the concern about receding income as a hurdle on the way to recovery.

Find out if critical illness insurance is worth it for your family

Those seeking coverage should consider this carefully and choose the policy (or critical illness insurance rider) that suits them best, considering both their coverage requirements and their budget. Better yet, get in touch with one of our experienced advisors to help educate you on your options.

Frequently asked questions (FAQs)

What is the difference between critical illness insurance and health insurance?

Critical illness insurance in Canada provides a lump-sum payment if you’re diagnosed with a life-threatening illness. This payment can help pay for any purpose, like covering treatment costs, paying off debts, or adapting your lifestyle. 

Health insurance covers routine medical expenses that provincial health coverage may not offer. This may include doctor visits, prescription drugs, and hospital stays. It may also include extended benefits like dental and vision care.

Can I purchase critical illness insurance if I have a pre-existing condition?

Yes, you can purchase critical illness insurance if you have a pre-existing condition, but it may be more challenging.

Insurers often assess the risk associated with your pre-existing condition.  This could lead to higher premiums, exclusions, or denial of coverage for illnesses related to that condition. 

Can I customize my critical illness insurance policy?

Yes, you can often customize your critical illness insurance policy to fit your specific needs. Insurers typically offer various options that allow you to tailor your coverage. They are as follows:

• You can select from a range of critical illnesses to include in your policy
• You can determine the lump-sum payout amount
• You can add optional riders, like the return of premium or disability income,  for additional benefit
• You can choose the length of coverage, whether it’s a set number of years or until a certain age

What are the exclusions typically found in critical illness insurance policies?

Critical illness insurance policies often include several common exclusions. These exclusions may vary from one insurer to another, but they generally include:

1. Self-inflicted injuries: Conditions resulting from intentional self-harm are usually not covered
2. Substance abuse: Illnesses arising from alcohol or drug abuse are commonly excluded
3. Non-disclosure: Failure to fully disclose your medical history can lead to denial of claims
4. Less severe conditions: Early-stage or less severe forms of certain illnesses, like some cancers, may be excluded