What is children’s critical illness insurance?

When your child is sick, the only thing that should be on your mind is their recovery. But unfortunately, when a child is diagnosed with a critical illness, there are wider repercussions that can affect more than just their health. Between taking time off work to attend to your child to paying for treatments or rehabilitation equipment, critical illnesses can create even more stress in a dire situation for the entire family.   

Getting critical illness insurance can bring you great peace of mind. Knowing you’ll have a financial safety net should your child fall seriously ill can allow for economic flexibility in your future plans and safeguard you and your family against the unexpected.

What is critical illness insurance?

Critical illness insurance is a type of coverage offered by life insurance companies that pays out a tax-free lump sum should the insured be diagnosed with a life-threatening illness or suffer a serious health event while the policy is active. Such critical illness coverages can be purchased as an add-on (a critical illness rider) to a life insurance policy, or as a stand-alone policy. Unlike traditional life insurance, critical illness insurance issues a benefit while the insured is alive, providing them and their family with financial support as they manage the financial and health impact of a life-threatening illness. It should be noted that the critical illness insurance benefit is only paid if the insured is diagnosed with a covered illness, as specified in the policy. The proceeds of the insurance can be used fully at the discretion of the insured (or the parent/guardian in the case of a children’s critical illness policy).

What is children’s critical illness insurance?

Critical illness insurance for children provides you with a lump sum tax-free payment if your child is diagnosed with one of the illnesses covered by the policy. The proceeds from the insurance coverage offer financial protection for the parents and the family as they focus on the child’s recovery if they fall seriously ill. The coverage offered under this policy is similar to adult critical illness, except there are a few extra conditions included in the list of what is covered. Children are covered for additional childhood illnesses that won’t appear on an adult’s policy.

What does children’s critical illness insurance cover?

Critical illness insurance generally covers 25 or 26 life-threatening conditions. The definitions for these critical illnesses are generally consistent across most insurance companies that offer critical illness insurance coverage. Children’s critical illness insurance covers a few additional coverages. 

The 26 conditions that most common carriers cover are:

Cancers and Tumours:

1. Benign Brain Tumour
2. Cancer (Life-Threatening)

Cardiovascular:

1. Aortic Surgery
2. Coronary Artery Bypass Surgery
3. Heart Attack
4. Heart Valve Replacement or Repair
5. Stroke (Cerebrovascular accident)

Neurological:

1. Bacterial Meningitis
2. Dementia, including Alzheimer’s Disease
3. Motor Neuron Disease
4. Multiple Sclerosis
5. Parkinson’s Disease and Specified Atypical Parkinsonian Disorders

Vital Organs:

1. Kidney Failure
2. Major Organ Failure on Waiting List
3. Major Organ Transplant

Accident and Functional Loss:

1. Acquired Brain Injury*
2. Blindness
3. Coma
4. Deafness
5. Loss of Independent Existence
6. Loss of Limbs
7. Loss of Speech
8. Paralysis
9. Severe Burns

Other

1. Aplastic Anemia
2. Occupational HIV Infection

You can read the full list of conditions covered, defined by the Canadian Life and Health Insurance Association (CLHIA) here. 

With children’s critical illness insurance, there are some conditions on this coverage list that children are commonly affected by. Some of these conditions include the following:

Additional childhood illnesses

• Autism spectrum disorder
• Cystic fibrosis
• Rett syndrome 
• Cerebral palsy
• Muscular dystrophy
• Type 1 diabetes mellitus

This is not an exhaustive list and the insurance company may have exclusions and stipulations around conditions and diagnosis. Some policies may have exclusions for pre-existing conditions. Always consult your policy wordings to see exactly what the policy covers or speak to an advisor who will walk you through your coverage options.

When can a child’s critical illness insurance policy be purchased?

A child’s critical illness insurance coverage can be purchased after the child is born and up to the age of 25 years for the child. Some companies may cover additional diseases before the child turns 17 years in age. While an application for the coverage can be issued as early as 1 day after the child is born, most companies will require that the contract be issued at least after the child has turned 1 month in age.

When can a child’s critical illness insurance policy be claimed?

You can submit a child’s critical illness claim if:

• the diagnosed critical illness meets the definition of a covered critical illness, as defined in the policy document
• the critical illness does not occur during the waiting period of the covered critical Illness;
• the diagnosis of the covered critical illness has been made by a specialist;
• the child has survived a period of thirty (30) days following the diagnosis of the condition

What are the benefits of children’s critical illness?

This critical illness policy lessens the financial impact on families, should the child be diagnosed with a serious illness. The lump-sum payment received after diagnosis can be flexibly used for anything you wish. Paid in a lump sum, this coverage helps you: 

• Compensate for lost income if you are required to take a leave of absence to care for your child
• Pay for additional expenses, including treatments and prescription drugs not covered by a provincial healthcare plan  
• Travel or hotel expenses if you have to travel to seek healthcare for your child. 
• Keep up contributions to RESPs, RRSPs or even mortgage payments, if you are not able to continue to work
• Any other special health care needs or personal care management your child or family might need. 

Other than coverage after being diagnosed with one of the 35 conditions, the premiums for these policies are low and generally guaranteed. This means that if the child continues the coverage into adulthood they will receive coverage at a lower rate than if they applied for critical illness as adults. With some children’s critical illness policies, premiums are only paid during childhood, but coverage can continue into adulthood.

What is limited pay children’s insurance?

Limited-pay policies represent a premium payment plan where you can pay for the policy for a for a set amount of time (sometimes 10 or 20 years). After this time is up, you no longer have to pay premiums, but the coverage will stay in force. Your policy is considered fully paid up after the limited pay period is over

With some children’s critical illness policies, limited pay options are available. This means that if you purchase a critical illness policy for newborn, you pay for the first 20 years of their life only. After that, the policy ownership can be transferred over to them and they get to keep the critical illness coverage for the rest of their life. 

Limited pay policies typically are the most expensive in premium payments since premiums are front-loaded.

What is ‘return of premiums’ on children’s policies?

Return of premiums is a feature that can be optionally added to the coverage allowing the parent or the child to seek a refund of premiums if there is no claim on the policy. Such return of premium options are typically offered after the 20 year limited pay period is over. This payout can be used for education costs, a downpayment on a house, or even business ventures.

Does my critical illness policy cover my child?

Generally, a parent’s critical illness insurance policy will only cover their diagnosis, not the diagnosis of a loved one. However, it is possible to add a rider to your critical illness policy to include your child, as well as those additional childhood illnesses. 

When adding this rider, your child’s coverage is tied to your policy—meaning that if you cancel your coverage or when your coverage expires, your child’s coverage will cancel or expire. Some companies may only allow the children’s rider if you have an enhanced critical illness policy yourself (compared to a basic policy). Additionally, riders may have restrictions to coverage amounts (limiting coverage to $20,000 or $50,000 depending on the company) compared to purchasing a stand-alone children’s critical illness policy which can be purchased for much higher amounts.

Which are the best insurance companies offering children’s critical illness?

While this product is more specialized, at PolicyAdvisor we work with many providers who offer children’s critical illness insurance. 

For stand-alone children’s policies, the following insurance companies offer options: 

• iA (Industrial Alliance) Financial Group
• Canada Life Insurance
• Desjardins Insurance
• Beneva Insurance
• Sun Life Insurance

 You can also add a children’s critical illness insurance rider to your policy through products purchased from the following insurance companies: 

• BMO
• Empire Life 
• Foresters 
• iA (Industrial Alliance) Financial Group
• Manulife 
• Beneva Insurance

When deciding which policy is best for your child, you may consider the amount of coverage offered, the conditions, and the premium cost. Insurance is there to provide financial protection for you when you are in a difficult time such as when a child is diagnosed with a critical illness. However, the premium cost should not bankrupt you. 

To determine you and your family’s need you can try out our critical illness insurance calculator. This tool will tell you how much coverage you may need to give you peace of mind, no matter what life throws at you.

What else can I do to protect my child?

In addition to children’s critical illness insurance, which can take care of financial needs if they fall ill, you can also purchase a children’s life insurance policy. These policies are purchased by a parent or guardian as either a rider on the parent’s policy or as a stand-alone policy for the child. Children term riders are generally the least expensive way to obtain coverage for your child. Stand-alone life insurance policies for children are normally issued as whole-life products. These stand-alone policies are guaranteed to remain in force for the covered child’s entire lifetime (including into adulthood) and generate dividends, creating an increasing pool of investment resource and coverage for the child.

Learn more

To find out how to best protect your child and their financial future, speak to one of our advisors. They can help you find the best children’s coverage for your family, whether it’s an add-on rider or a new policy for your child. Let critical illness insurance give you that peace of mind, so you can focus on more important matters like helping your child get better.

Try our free critical illness insurance calculator to figure out how much coverage you might require or speak to our friendly advisors.