Critical illness insurance

You can get critical insurance coverage to protect yourself and family in case the unexpected happens

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Fact checked

Critical illness insurance provides you with a lump sum benefit if you suffer a serious medical condition. This lump sum benefit can be used to ease your financial strain during an already stressful time. What’s covered in each policy varies by provider, but some can cover over 30 different medical conditions including:

brainStroke

cancer-trauma

Cancer

heart-trauma

Heart attack

Critical illness insurance can either be bought as a standalone policy or bundled with your life insurance policy. Keep reading to find out more about the benefits of critical illness insurance.

What does critical illness insurance cover?

Critical illness insurance provides you with a lump sum benefit when you’re unable to work due to a listed condition. Listed conditions can vary from provider to provider but some conditions that can be covered are:
  • Alzheimer’s disease
  • Aortic surgery
  • Aplastic anaemia
  • Benign brain tumour
  • Bacterial meningitis
  • Blindness
  • Burns (severe)
  • Cancer
  • Coma
  • Coronary angioplasty
  • Coronary bypass surgery
  • Deafness
  • Dementia
  • Heart attack
  • HIV (occupational infection)
  • Kidney failure (chronic)
  • Loss of limbs or eye
  • Loss of speech
  • Loss of independent existence
  • Major organ failure on waiting list
  • Major organ transplant
  • Motor neuron disease
  • Multiple sclerosis
  • Parkinson’s disease
  • Paralysis
  • Stroke

There’s no restriction on how you use the payout from a critical illness insurance policy claim. You can use it to pay your mortgage, medical expenses, for a long rehabilitation vacation, to clear yourself of debt, to pay for childcare services or to hire help around the house.

A major point to keep in mind is that the benefit is only payable should you survive.

Most insurance providers have a survival period of at least 30 days. To get around this, some insurers will let you combine your life insurance and critical illness insurance into one policy.

When will a critical illness insurance policy pay out?

Some of the main requirements for a payout when it comes to critical illness insurance include:

  • Diagnosis of a covered condition. The conditions covered are listed in the terms and conditions of your policy. Depending on the condition, you can either receive a full or partial pay-out.
  • You live through the survival period. This is typically set at 30 days from when you’re diagnosed with an illness. The reason behind a survival period is because critical illness coverage is designed to pay if you survive a traumatic event and not in the event of death.

Before taking out a life insurance policy, read the contract from the insurer carefully to understand when claims will be paid or rejected.

Why would a claim not be accepted by an insurer?

Some of the common reasons why an illness claim wouldn’t be paid out include:

  • Pre-existing medical conditions Many policies will not cover illnesses that arise from pre-existing medical conditions.
  • The exact illness is not covered. Most critical illness policies will have a set list of what conditions are covered. If you don’t check the exclusions in your policy, you’ll be in the dark if it comes time to make a claim — always know what is and isn’t covered.
  • Nondisclosure. Your claim can be declined if you failed to disclose a pre-existing medical condition, meaning if the sickness or injury started or was diagnosed before the insurance was purchased.
  • Self-inflicted. Any injuries that were caused by the person insured from attempted suicide or any other situation would typically result in a rejected claim.

What are the key features of critical illness insurance?

Critical illness insurance allows you to concentrate on recovery instead of finances if you’re diagnosed with a serious illness. Common features include:

  • Coverage for common critical conditions and illnesses. Some policies have coverage for over 30 different illnesses. If you receive a diagnosis, you can begin the claim process.
  • Access to premium treatment. Some insurers will also provide access to medical specialists, as well as other support services.
  • Lump sum payment. This could range from $25,000.00 to to over $2 million (if fully underwritten) depending on the illness.
  • Wider range of coverage. With higher premiums, the range of covered conditions increases to include things like organ failure, HIV, loss of independent existence or loss of senses.
  • Children can be insured. Some insurers bundle the policy with added coverage for your children.

Are critical illness premiums tax-deductible?

Generally, premiums paid toward critical illness insurance are not tax-deductible. However the benefits paid from the claim are tax-free. Talk to your tax advisor to verify the tax benefits for your specific situation.

Compare critical illness insurance options

Name Product Types of Insurance Coverage Range Issue Ages Medical Exam Required Province Availability
 Life Insurance Through PolicyAdvisor
Life Insurance
Mortgage Protection
Disability
Critical Illness
$25,000 - $5,000,000
18 - 72 years old
No
Ontario
Policy Advisor is a digital life insurance brokerage that has partnerships with 17 insurers in Canada.
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When would a critical illness policy be canceled?

Consult the terms and conditions for your plan for a full list of circumstances, but be aware that your policy will likely end if:

  • The policy is canceled.
  • You are paid out the full amount of insurance benefits.
  • The life insurance coverage that the critical illness insurance is attached to ends.
  • Non-disclosure of important details (a pre-existing medical condition) when you apply.
  • Premiums aren’t paid.
  • The termination date is reached — either as part of the policy or age of the insured.
  • A fraudulent claim is made.
  • The individual dies.

Traps to look out for when it comes to critical illness insurance

  • An added cost. If you’ve been looking at general insurances, you may find that critical illness insurance is added in as an extra. This means you should consider if you really need this supplemental protection so you’re not over extending your finances. Read our guide to learn more about what to consider when purchasing life insurance.
  • Pre-existing conditions. If you’re already in poor health, or you’re a smoker, then odds are good you’ll be paying high premiums — that’s if you can even find coverage. So, if you’re already suffering from a critical illness, this type of insurance may not make the most sense because you won’t be eligible to claim for a pre-existing condition.

Life insurance vs. critical illness insurance

Life insurance and critical illness insurance work differently, and many people use both to make sure themselves and their family are fully protected. You can purchase polices separately or bundle them together to save money.

Life insuranceCritical illness insurance
DefinitionAn insurance policy that pays out when someone dies or is diagnosed with a terminal illness (as an additional rider)An insurance policy that pays out when someone is diagnosed with a serious illness that they’ll likely recover from
Who gets paid?The policyholder’s named beneficiaryThe policyholder
When do they get paid?After showing proof of a terminal illness or a death certificateAfter being diagnosed with a serious illness
What is the money used for?Final expenses, debts, supporting children and providing for loved onesReplacing lost income, nursing care, home modifications for disabilities and medical treatments

Is critical illness insurance worth it?

Critical illness insurance is important to consider for multiple reasons. It can help you cover the costs of bills, childcare, groceries and other expenses like mortgage payments or rehabilitation while your incapacitated.

Essentially, critical illness is a useful form of life insurance that can protect your assets and allow you to continue with your way of life if you’re ill and unable to work.

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