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Is Critical Illness Insurance Worht It in Canada?

We all know somebody who has been diagnosed with one or more critical illnesses. And we also know that there are Canadians out there who are battling serious illnesses such as stroke, cancer, or heart attack, and are unable to work because of their health condition. Unfortunately, a number of those who were inflicted by a serious illness don’t have the financial means to support themselves and have to rely on family for financial support, dip into their life savings, or go into debt to keep up with their bills and other financial obligations.

One in three Canadians will experience a life-altering illness in their lifetime. While the healthcare system provides excellent medical care, the financial burden often falls on you. Critical illness insurance serves as a financial safety net, offering you peace of mind during challenging times. This comprehensive guide will delve into what critical illness insurance is, how it works, and why every Canadian should consider it.

If you’ve found this article, chances are, you’ve considered getting some kind of critical illness insurance for yourself to financially protect your household in case you get inflicted with a serious medical condition. Insurance such as critical illness cover provides a lump-sum payment in case the insured ever gets affected by sudden and unexpected life events such as illnesses that are considered life-threatening and may keep you from doing what you do to earn a living.

This guide covers everything you need to know about critical illness insurance in Canada, from why you need it to how to save money on premiums.

What is Critical Illness Insurance?

Critical illness insurance is a living benefits insurance policy that pays out a tax-free lump sum if you develop a specified illness or health event while under its coverage. Unlike life insurance, critical illness insurance policies are only available as term policies but you can get a policy that covers you up to age-100, which is considered to be somewhat of a permanent plan.

Critical illness insurance covers you for a fixed period of time, depending on the term length that you’re going to sign-up for. While most of these policies are renewable, we suggest that you go with a longer-term such as a term to age 75 policy to avoid a premium increase at each renewal.

How Does Critical Illness Insurance Work?

how does critical illness insurance work

As mentioned, critical illness insurance policies work by providing a tax-free lump sum payout to you upon diagnosis of one of the illnesses or health conditions listed on your policy. These are typically referred to as “qualifying events”, and there are usually 25 covered conditions offered by most insurance carriers, with some offering coverage against 26 serious illnesses.

When you apply for a critical illness insurance policy, your health and lifestyle are underwritten. After which, you will be offered coverage. While you’re healthy and well, you contribute to the policy on a monthly or annual basis, if you develop one of the illnesses or health events listed on your policy during the term of your contract, the insurance company will pay out the tax-free lump sum amount as agreed when you signed up for your contract.

If budget isn’t a concern, we suggest that you get a critical illness coverage of at least $100,000.00 because living benefits policies such as this aim to protect you against financial difficulties if you can’t work due to a serious condition that’s covered by your policy.

As you may already know, your income stops if you can’t work, and there are two general three life events that may prevent you from doing what you do to earn a living for yourself or your loved ones:

  1. Injury
  2. A serious illness
  3. Premature death

When a person is alive and well, it’s but natural for us to seek other income sources in case of job loss or business setbacks but when we’re sick or injured, the income loss or reduction is no longer within our control that’s why living benefits such as critical illness insurance is an important financial safety net to have in place.

A critical illness insurance payout can be of great help because it alleviates some if not all of the financial stress placed on you and your family during such a difficult time, allowing you to focus on your recovery instead of worrying about when or where your next paycheck is going to come.

Why You Need Critical Illness Insurance

Financial Stability

Critical illness insurance provides a lump-sum payment that can be used to maintain your lifestyle, cover healthcare costs, or even pay down your mortgage.

Expert Medical Opinion

With most policies, you have the option to get a second opinion from world-renowned specialists, ensuring you’re getting the best possible care.

Emotional Well-being

Programs like “The Healing Journey” offer mental health support, teaching you how to deal with fear and anxiety during your recovery.

What Does Critical Illness Insurance Cover?

Critical illness insurance in Canada typically covers a wide range of conditions. The top four critical illnesses are:

25 Common Critical Illness Conditions Covered by Most Insurance Companies

Additionally, many policies cover up to 25 other conditions, ranging from severe burns to loss of limbs. 

Additional Condition(s) Covered by Some Insurance Carriers in Canada

5 Critical Illnesses Covered for Children up to their 24th birthday

Is Critical Illness Insurance Worth It in Canada?

woman - is it worth it

Just like life and disability insurance, critical illness insurance is a financial risk management tool that mitigates or minimizes the potential financial impact of serious life events such as serious illnesses, so you and your family can maintain your normal standard of living in the event that you or your partner do become critically ill.

If you can’t work, you’ll either dip into your savings, investments, or even debts to support yourself or your loved ones because, as you may already know, your bills and other costs of living expenses don’t necessarily stop when your income stop.

Critical illness insurance provides a lump sum amount of benefit that will be paid out to you, tax-free in case you ever get inflicted with a covered condition. Say, you have $250,000.00 of the critical illness insurance benefit, and you’re making $50,000.00 a year, your critical illness insurance payout will help your family maintain the same living standard even if it takes you 5-years to fully recover and go back to actively working again without having to liquidate your investments, retirement funds or go into debt.

This makes critical illness insurance worth it because it provides you with the necessary funds to stay afloat financially while you can’t work due to a serious health condition.

Some people argue that it isn’t worth it if you don’t make a claim. I say that it’s good to have the coverage in place in case you ever have to make a claim but it’s better if you don’t because you and your loved ones won’t have to deal with such a difficult situation and there’s actually a way on how you can get back all of the money you’ve contributed to your policy either at surrender, expiry, or upon the insured’s death if you didn’t claim on the policy which will be discussed on a further section below.

Types of Critical Illness Insurance Coverage

As a living benefits policy that aims to provide income protection for Canadians who may be diagnosed with a critical illness, there are two types of critical illness policies available.

Basic or Top 4 Illnesses Coverage

The first type of critical illness insurance covers the top 4 life-threatening conditions or diagnoses, such as cancer, heart attack, stroke, and coronary artery bypass surgery. This policy would not pay out any benefit when you develop other illnesses outside the top 4 conditions.

Enhanced Coverage

The second type of critical illness insurance offers a blanket or comprehensive coverage, that covers you for the top 25 or 26 (depending on the company) life-threatening illnesses in Canada. This includes blindness, deafness, severe burns, and loss of independence.

Critical Illness Insurance Types by Length of Coverage

Critical illness insurance can cover you for 10-years, 20-years, 25-years, up to age 75, or up to age 100. Please note, however, that while it’s good to have coverage up to age 100, it can be restrictive premium-wise, and besides, as an income protection insurance, you’ll only need critical illness insurance while you’re actively working.

In most instances, you will no longer need it after your 65th birthday; provided of course, if you’re already retired by then, in which case, retirement planning should be included in your overall financial plan.

Sometimes, it’s tempting to get the shortest critical illness insurance term possible, which in this case, pertains to a 10-year term policy. The cost of a 10-year term plan is usually immaterial to most Canadians, however, you may find yourself needing the coverage longer than 10 or 20-years. Renewals of critical illness insurance can be costly because the renewed premiums are based on your attained age at policy renewal that’s why we suggest our clients go with a longer-term coverage such as up to age 75 to avoid premium increases at every renewal, you can then cancel the coverage when you retire since you no longer need to actively work for income.

The main purpose of a living benefits policy is to provide you with income or money when you’re unable to work, when you’re retired, you’ll have passive income through pensions and investments, which means you need not actively work for your money to flow in. Hence, money comes in even when you’re unable to work.

How to Save Money on Critical Illness Insurance

family - save money - piggy bank

Choose a Longer Term

Opt for a policy that covers you up to age 75 to avoid premium hikes at each renewal. You need not keep your policy up to age 75 because you can cancel it if you no longer need the income protection it provides, usually when you retire at age 65.

Add Return of Premium Options

Most people complain about paying insurance premiums citing that they may never use it.

While this is a fair argument, people who were diagnosed with or are battling life-threatening conditions and didn’t have any coverage would say otherwise.

There is actually a way to save money on critical illness insurance policies. With a longer-term CI policy, you can add what’s called “Return of Premium” options or “ROP” both as a living benefit and upon the insured’s death.

Whatever money you’ve contributed to the policy will be returned to you at some point, (year 15, 20, or at age 65) or if you pass away without actually or using the CI benefits.

It’s like hitting two birds with one stone, either the insurance company pays out your benefit, or you get your money back either at surrender, the maturity period, or the insured’s death.

You can book a virtual appointment here to learn more about how we can help you get set up with money-back critical illness insurance and how you can benefit from this kind of policy.

Critical Illness Insurance Cost

critical illness insurance cost

The cost of critical illness insurance in Canada can vary depending on several factors.

  • The term or length of the coverage,
  • the benefit amount,
  • your age,
  • your gender
  • Optional riders such as the return of premium options

Critical illness insurance costs will also depend on the specific type of product you choose to implement.

Basic critical illness insurance coverage is cheaper than enhanced critical illness insurance, however, a basic coverage only covers the top 4 illnesses, while an enhanced coverage protects you from the financial impact of 25 to 26 illnesses depending on which insurance company you’re getting your policy from.

If you want to further explore what options are available to you and the exact amount for your preferred coverage, you can book a non-obligatory virtual appointment with us here.

To lower your monthly premium cost, you can either implement the top 4 illnesses coverage or get enhanced coverage with a shorter-term period, do understand however that while a shorter-term period such as a 10 or 20-year term coverage has lower initial premiums, they tend to get expensive over time. So, if you’re planning to have CI coverage to financially protect yourself from income loss, you may consider the term to age 75, if the budget allows it.

To give you an idea as to how much your monthly premium would cost below is a chart of 20-year critical illness insurance quotes by age as of this writing:

AgeCoverage AmountMonthly Premium (Male)Monthly Premium (Female)

How to Get the Best Critical Illness Insurance in Canada

couple buying insurance with advisor

The best critical illness insurance in Canada gives you coverage to the most covered conditions and returns your money if you didn’t make a claim.

Most insurance companies have the return of premium options as a living benefit, either at surrender (usually 20-years or at age 65), at expiry – age 75, or upon the insured’s death provided that there was no claim on the policy (the policy ends when a claim is made, and the full benefit was paid out).

The thing is we don’t really know what kind of illness(es) may affect us down the road, and while we try to avoid them by leading a healthy lifestyle; we can never tell, that’s why it’s best to have a blanket coverage that covers almost all common serious illnesses – 26 as of this writing, which includes acquired brain injury, severe burns, deafness, and blindness. Most insurance companies, however only cover 25-illnesses, leaving out acquired brain injuries.

In short, the best critical illness insurance in Canada gives you the most coverage and returns your money if you didn’t make a claim. This kind of policy provides you with the necessary coverage yet you can get your money back if you didn’t get seriously ill during your contract was in force.


Is there a waiting period before you can make a claim?

There is a 90-day waiting or elimination period before you can make a claim starting the day of your policy’s effectivity. This means that a client who has been approved a critical illness insurance policy in the last 90 days will not be able to receive benefits, should day claim within this time-frame.

What is the survival period for a claim?

Critical illness insurance policies have a 30-day survival period after diagnosis. As a living benefit policy, the critical illness insurance benefit will not payout if the insured passes away before surpassing the 30-day survival period.

Can I convert my CI policy into long-term care insurance?

Some policies allow you to convert your coverage to long-term care insurance between the ages of 60 and 65 without requiring additional medical tests.

Talk with an Insurance Advisor

SmartWealth Financial Advisors

Most articles you would read online about critical illness insurance are general and are for information only. The best way to plan a critical illness insurance policy is to talk with a licensed insurance advisor who can help you design a well-thought-out critical illness insurance policy that provides you with long-term (or short-term) coverage that’s specific to your needs, financial situation, and future goals.

Feel free to book your appointment with us at your convenience by choosing a date and time below that’s most convenient to you and we will assign a SmartWealth advisor to accommodate you at your chosen date and time.

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