is critical illness insurance worth it

Understanding the Value of Critical Illness Insurance in Canada

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So, is a critical illness insurance plan worth your buck?

When it comes to critical illness plans, there are a lot of mixed opinions out there. Some Canadians feel that it’s not worth their money, while others feel that it’s an essential safety net in case they ever lose the ability to earn a living due to a serious health condition.

If you’re healthy and have a good income, then you may not feel the need for critical illness policies. However, if you have a family history of a serious illness or are worried about the potential financial risks of serious medical conditions, you may think it’s important to implement a critical illness insurance policy for your peace of mind and financial protection.

In this article, we’ll help you weigh the pros and cons of having critical illness coverage so you can decide if having one is right for you.

What is Critical Illness Insurance?

Critical illness insurance is a type of insurance that gives you a lump sum payment if you’re ever diagnosed with a covered serious health condition, like cancer, heart disease, or stroke.

The money from a critical illness policy can be used however you see fit, whether it’s to cover your mortgage payments, pay for treatments not covered by your provincial health care plan, or simply help you make ends meet while you’re unable to work for income.

Critical illness insurance policies are not a health insurance plan, it will not pay for your extended health medical expenses such as vision, dental, and prescriptions. Instead, it is intended to provide you with a lump-sum payment if you are diagnosed with a covered critical illness.

If you’re like most actively working Canadians, your income would probably stop if you can’t continue working due to a kidney failure, a major organ transplant, or any other life-threatening illness. As a living benefits insurance product, critical illness insurance provides the financial relief that you and your loved ones would need during such a downtime so you can focus on getting well, instead of worrying about money.

Is It Worth Getting Critical Illness Insurance?

“If you have to activley work to earn income, critical illness insurance is worth it. If you’re worried about losing money in case you won’t make a claim, return of premium riders return all or part of your premiums at cancellation, expiry, or death.”

doctor consultation - critical illness

A lot of Canadians think that they can self-insure when it comes to the financial risk of a serious illness since they have some amount of money saved up for retirement. In most cases, you will most likely survive the health condition but it does take time to fully recover from an illness, as a result, most Canadians find it hard to recover financially after recovering from a critical condition.

Critical illness insurance does not only protect your household’s financial security against the financial risk of a serious illness, but more importantly, it can also protect your retirement funds and/or life savings from being liquidated during your recovery period.

Protecting your wealth is one of the best benefits that a critical illness insurance policy can provide you and your household.

Remember, while the basic medical services in Canada are usually covered by our provincial healthcare insurance, some specialized treatments aren’t. A lump sum, tax-free payout from a critical illness insurance policy will allow you to pay for medical costs that aren’t covered by our provincial health insurance, and do it without touching your hard-earned money.

How to Make Critical Illness Insurance Worth It

Many Canadians are concerned that if they don’t get sick, then the monthly or annual critical illness insurance premiums will go to waste. For one, most other insurances that you’re already paying like your home and auto insurance will only pay if your house burns down or if your car gets damaged in an accident – but you still have to keep paying the premiums even if nothing happens. As such, you’re already “wasting money” on these policies but you’re paying them anyway for your financial security. If you can’t work due to a serious illness, how are you going to finance these other policies, together with your other bills and cost of living expenses?

Whether you’re in between getting critical illness insurance coverage or not, there is a way to get a critical illness insurance policy that returns all your premium contributions in the event that you don’t get a payout. It’s called the return of premium or ROP rider.

medical professional - critical illness insurance worth it

Return of Premium Riders

The return of premium (ROP) rider can be added as a living benefit and as a death benefit.

Living Benefit Return of Premium

The living benefit rider makes it a point that you get your money back in 10, 20 years, at age 65, or at age 75 if you don’t benefit from your policy’s coverage while you’re alive.

Death Benefit Return of Premium

The death benefit ROP rider, on the other hand, will return all the premiums that were contributed to the policy in the event of the insured’s death, provided that there was no critical illness insurance payout.

Adding Return of Premium Riders

By putting these riders in place, you’re not leaving money on the table. So either your policy pays out the benefit or you or your family gets all the money back.

These riders will make your critical illness insurance purchase more than worth it because you will have a forced-saving component, while you’re financially secured in case of a covered critical illness condition. This allows you to benefit from your policy whether or not you do get seriously ill thereby eliminating the feeling of “wasting money” on premiums.

A critical illness insurance policy is one of the most important investments you will ever make because it gives you the financial security and peace of mind you need in case of a serious health condition. It’s a safety net that can help you and your family weather any financial storm that a serious illness can bring.

Is Critical Illness Insurance Really Important?

critical illness insurance important

Serious illness can strike at any time, leaving you with a substantial financial burden if you are not properly insured for such a life-changing event.

Thousands of Canadians seek assistance through crowdfunding sites like GoFundMe, when their family experience a serious life event like premature death or unexpected serious illness of a breadwinner that leaves their family in a difficult financial situation.

A critical illness insurance policy gives you a lump sum payment if you are diagnosed with a covered serious illness, which can then be used to help cover the costs associated with your recovery and supplement your income while you’re recovering.

These costs can include things like:

  • Uninsured medical expenses
  • Mortgage or rent payments
  • Childcare
  • Travel expenses for out-of-town treatment
  • Home modifications for accessibility purposes
  • Food and other living expenses
  • Utility bills such as electricity, heat, and water

Without a critical illness insurance policy in place, you would likely have to cover these expenses out of your own savings or even dip into debts, which can quickly deplete your financial resources and disrupts your household’s financial stability. A critical illness insurance policy can provide you with peace of mind, knowing that you and your family are financially protected in the event that you experience a serious illness.

Critical illness insurance benefits are invaluable, covering not only medical bills but also non-medical expenses, such as transportation to treatment centers. The money can cover car payments, childcare costs, and other essential daily living expenses while you recover. These benefits can even be used to pay for deductibles and additional medical expenses. These benefits are particularly valuable especially if you have people depending on you financially.

Factors Affecting Critical Illness Insurance Premium Rates

critical illness insurance risk factor

There are several factors that affect your critical illness insurance premium rates, such as:

Your age

Your age at the time of policy implementation will have the most significant effect on your critical illness insurance premium rates. The younger you are when you start your policy, the lower your rates will be.

For example, a 35-year-old, non-smoker, male who is in good health can expect to pay an annual premium of about $355 for a 10-year renewable, $100,000 policy. A 45-year-old, non-smoker, male, on the other hand, will have to pay $708 annually for the same coverage.

***Figures as of this writing***

Smoking status

Smokers will pay higher critical illness insurance premiums than non-smokers because they are considered to be a higher risk. For example, a 35-year-old smoker in good health can expect to pay about $555 per year for $100,000 of CI coverage, compare to the annual premium of $355 for his non-smoking counterpart.


Gender also plays a role in how much you’ll pay for critical illness insurance. In general, men will pay slightly more than women because they have a higher risk of developing CI, although this difference is usually not as significant as the one for smokers.

Your health and family medical history

Your health and family medical history will also play a factor not just in the amount of contribution but also in whether or not you’re approved for critical illness insurance. If you have a family history of cancer, heart disease, or stroke, you may be seen as a higher risk and have to pay higher premiums. Conversely, if you have a healthy lifestyle with no family history of serious illness, you’ll likely be able to get lower premiums as you may be approved at preferred rates due to lower risk.

Coverage Amount

The most important factor that affects the cost of critical illness insurance is the payout amount, which can vary from $10,000 to $100,000. The higher the payout amount, the higher the monthly premiums. Moreover, a comprehensive critical illness insurance policy may cover twenty-five to twenty-six illnesses.

Policy Term

You may want to opt for a shorter policy term if you’re on a budget but you’re going to miss out on the living benefit return of premium, however having affordable coverage that meets your budget is better than having none at all. Another way to lower your premium is to only get basic critical illness insurance than a comprehensive one.

A basic policy covers the top 4 serious illnesses in Canada, which are heart attack, stroke, cancer, and coronary artery bypass. I don’t usually recommend getting basic coverage as we really can’t say what illnesses may inflict us, that’s why if budget isn’t a concern, get a comprehensive policy that covers 26 illnesses, and with the return of premium riders.

Optional Riders

These riders can add extra protection to your policy, and they can also affect the contribution rate that you’ll need to pay.

Some of the most common optional critical illness riders include:

Waiver of Premium: This rider waives further premium contributions in case the insured or policy payor becomes disabled.

Return of Premiums: This is one of my recommended riders if you don’t want to waste money on your critical illness insurance which allows your or your named beneficiary (at death) to receive the premiums paid into the policy at surrender, expiry or the insured’s death.

Term Life Insurance Coverage: A life insurance coverage can also be added as a rider on a critical illness insurance policy. You can learn more about term life insurance and how you can apply it to your overall financial plan.

Each of these riders can add extra protection to your policy, but they will also increase the cost of your premiums. It’s important to weigh the cost of the premiums against the benefits that each rider will provide, in order to decide which riders are right for you.


The nature of your occupation and the environment you live in will affect your premium charges. For instance, if you work in a dangerous environment, your premiums will likely be higher. Similarly, if you have a high BMI, your premium rates will be higher. People with a high BMI are at greater risk of developing serious health problems. However, it is important to note that these factors can influence your critical illness insurance premium rate.

The costs of critical illnesses can be high, and out-of-pocket expenses can leave patients impoverished.

Which is the Best Critical Illness Policy?

notebook with five stars

The best critical illness insurance policy covers the most comprehensive list of serious illnesses, while you can get a basic critical illness policy that only covers 4-illnesses, I would recommend that you go with a comprehensive one as it gives you ample protection against the most common of illnesses that inflict Canadians today.

You should also consider adding return of premium options for added benefit, so you or your loved ones get your money back in case you’ll never need to make a claim due to non-claim. The most critical age that Canadians can get inflicted with a critical illness condition is between 50 and 65 years of age.

Ideally, you should be retiring from active work at age 65, so you can go ahead and cash out your policy at this age, and any money accumulated into your policy can be added as a supplemental amount for your retirement funds.

While comparing plans, you may be tempted to get a 10-year renewable policy but this does not necessarily save you money as it gets expensive every time you renew your coverage every 10 years. I would suggest a level premium that can be paid up in 20 years or up to age 75 as the premiums on these policies are underwritten on your current age and will stay level until you reach the age of 75, should you wish to keep your coverage that long. And when you add the return of premium options, your premium contributions are banked and can be cashed out at 100% on the 20th year going forward.

As a living benefit, critical illness insurance isn’t the same as life insurance, as it does not aim to protect your loved ones in case you pass away, it pays out when you get sick with a life-threatening condition and need the money to help you recover without the financial burden.

How Much Critical Illness Insurance Is Enough?

When it comes to critical illness insurance, the question of how much coverage to buy is often a tough one. It is not as simple as you may think, as each serious illness affects a person and his or her household differently but to make it easier, a needs analysis based on your potential income lost makes more sense in computing how much coverage you’re going to need.

For the average income Canadians, I always suggest not going below $100,000.00 of coverage as long as the monthly contribution is within their comfortability as this amount has the ability to provide $25,000.00 a year of the cost of living allowance should it take you about 4-years to fully recover from your illness.

If you’re a high-income earner, you should plan for higher coverage, one that will keep your household financially afloat without liquidating your other assets should your number one asset (ability to earn) ever fails due to a serious health condition.

Who Needs Critical Illness Insurance

who needs critical illness insurance

In most cases, a critical illness diagnosis can have a dramatic impact on a person’s day-to-day life, including costly travel, secondary care, and lodging. In addition to being emotionally and financially draining, a critical illness diagnosis can prevent people from actively working for income and even completing routine household tasks.

Critical illness insurance is designed to provide a lump sum, tax-free payment for a critical illness diagnosis, allowing you to focus on recovering and resuming your life.

If you’re someone who doesn’t have to work for income or help out in the household, you may not need critical illness insurance coverage but if you’re someone who needs to work for income for yourself and your household or if someone has to miss work to assist you in fighting a dreaded condition, you do need critical illness insurance.

In general, if your income stops, if you can’t work, you need insurance! and one of these personal risk management policies is well-planned critical illness insurance.

Choosing a plan for critical illness insurance depends on your budget, coverage amounts, and future goals. As unique as most Canadians are, there’s really no one-size fits all critical illness policy, that’s why working with an advisor in helping you structure your plan is important.

As you may already know, you can use the benefit whichever way you please, heck you can even pay for a trip abroad for better medical care or simply go away and relax while you’re recovering so you’re not really limited as to where you’re going to use your benefit but either way, a well-planned policy will help you plan ahead in case of an unfortunate event that no Canadian ever plans to have.

If you have any questions or would like to know more about how we can help you, please don’t hesitate to contact us.

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