Critical illness insurance issues a single lump-sum benefit should you be diagnosed with a critical illness that falls under the policy’s coverage, such as cancer, multiple sclerosis or paralysis. Unlike disability insurance, critical illness coverage is not designed to be ongoing, but to handle immediate expenses. That said, you’re entirely free to use this money however you wish, from paying for in-home care to taking a once-in-a-lifetime trip. If you’re curious about critical illness insurance, read on to learn all about why it’s a popular form of coverage for many Canadians.

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.

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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- 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.

As noted by Weir, some employer plans include critical illness insurance in their group policies, but freelancers don’t have access to this benefit, so it may be even more important to those who work for themselves. Those with children may be particularly interested in insuring against unanticipated expenses.

Critical illness insurance is one way to protect against unmanageable expenses for you or your family in the event of a serious illness. It’s not ongoing like disability insurance, but it can provide a much-needed infusion of cash at exactly the right time.  

Death and critical illness

When the policyholder of critical illness insurance dies, any approved benefit would be paid out to the estate.

How to get critical illness coverage

If you’re going to purchase critical illness coverage on your own (as opposed to through a group employee plan), you’ll need to select your insurance provider. You can locate CLHIA member companies on their site, ask family for referrals to any life insurance provider, or search for life insurance online. Just make sure they’re registered and licensed to sell you critical illness insurance.  It’s typically sold alongside life and disability insurance.  

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Once you decide on a provider, you can discuss the details of your policy, including term and benefit amount, and any additional add-ons like a loss of independent existence rider (inability to work permanently) or a disability waiver-of-premium rider (waiving of paying premiums if injured). As mentioned above, you’ll have to complete a questionnaire outlining your health and family history. Your agent can help you find a balance between coverage and premiums to match your situation. 

Making a claim

Should you be diagnosed with a critical illness covered by your policy, your doctor will need to submit the diagnosis to your insurance agency. This will trigger your claim. 

It’s not easy or comfortable to imagine receiving a critical-illness diagnosis, but it’s a reality for many Canadians at some point in their life. Critical illness coverage is one way to reduce stress around this kind of life-changing event, and ensures you’re better prepared to meet its challenges.

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