What is critical illness insurance?
Critical illness insurance grants you a one-time, predetermined lump-sum payment in the event of one of several diagnoses. Unlike a disability plan, this is not designed to replace employment as an income stream, but to provide a sum of money to handle expenses associated with living with a critical illness. For example, you might use the funds to modify your living space, or to pay for treatments or in-home care. Or you might use it for bucket-list ideas, such as travel or to purchase pilot training lessons, or to make a charitable donation. The money is yours to do with as you please—with no strings attached.
What does it cover?
Critical illness insurance coverage varies according to the plan you select. To get a better idea of what types of coverage are available, we spoke with Joan Weir, director of health and disability policy at the Canadian Life and Health Insurance Association (CLHIA), a voluntary trade organization representing life insurance and health insurance providers in Canada.
“Covered critical illnesses will be defined in the contract,” says Weir, adding that there are around 26 diagnoses that qualify for coverage. These usually include cancer, heart attack, stroke, multiple sclerosis and Parkinson’s disease. Kidney failure, loss of limbs, blindness, deafness, paralysis and severe burns may also be a part of your package.
If you’re interested in specific types of coverage, you should compare available plans, but Weir notes that you can’t pick and choose your types individually. “Critical illness insurance is also sold as part of workplace group benefits,” she says. “In this case, it would be the employer that would choose the coverage for their employees.”
What you need to know about rates and eligibility
As with all types of life insurance, critical illness coverage rates depend on the terms of the policy in addition to your health, family history and age. Critical illness coverage is usually sold in terms of 10-year blocks to the age of 75 or 100, and you may have the option to lock in premiums.
In general, the older you are when you purchase coverage, the more expensive it will be. “As with most insurance products, an individual will need to complete a health questionnaire concerning their current and past health history, as well as family history,” says Weir. “If an individual’s health information indicates the presence of a critical illness, the application could be declined.”
Once you’re approved, you’ll be covered for as long as the policy remains in force, even after a claim. “As an example, let’s say a covered individual develops a particular cancer but is treated and declared cancer-free,” Weir explains. “If they’re later diagnosed with a different cancer, the second claim will likely be payable, provided it’s unrelated to the first.”
The amount of the payout will also affect the rate. As Weir notes, critical illness insurance can have a vast payout range—anywhere between $10,000 and several million. Policies with higher coverage amounts will be more expensive.
Who needs critical illness coverage?
Much of Canadians’ medical needs are met through the universal healthcare program—but not all of it. Home care, some treatments, and prescription drugs are not covered and have to be paid for out of pocket. Critical illness insurance could relieve the financial pressure of this kind of situation. It can also go toward end-of-life expenses or anything else you might want to spend it on.