Is Critical Illness Insurance Right for You?

Learn more about Critical Illness and What You Should Consider When Applying For It.

4 Minute read

Is Critical Illness Insurance Right for You?

Is Critical Illness Insurance Right for You?

Learn more about Critical Illness and What You Should Consider When Applying For It.

4 Minute read

Applying for Life Insurance With Diabetes in Canada

Critical illness insurance pays the insured a tax-free lump sum on diagnosis of any one of the critical illnesses such as heart attack, stroke or cancer, and if they survive the waiting period. Policies cover anywhere from those three medical conditions to as many as 26 or sometimes more. Statistics show you are almost five times more likely to suffer from a critical illness than you are to die before you reach the age of 65.

What Illnesses are Covered by Critical Illness Insurance?

Insurers will usually cover the big three: heart attacks, strokes, and cancer, as they are the most common, taking up 91% of critical illness claims. Approximately 67% of all Critical Illness insurance claims paid are for Cancer. Heart attack and stroke are 24% of claims. 6% are claims for illnesses such as blindness, major organ transplant, multiple sclerosis, paralysis, and Parkinson’s disease. The remaining 3% are less common critical illnesses.

Factors insurance companies consider when underwriting and determining rates for diabetics.

Insurance companies will usually cover 26 illnesses, but depending on the insurer, some will cover even more. Many of the large insurance companies offer a simplified and comprehensive version of coverage. The simplified policies cover 3 to 5 illnesses, while the comprehensive policies offer coverage for upto 26 life illnesses and offer additional added benefits such as access to Best Doctors, a privately owned, global benefits provider that serves more than 40 million members worldwide. For example, Manulife has 2 simplified critical illness products that cover the 5 illnesses, and a comprehensive plan that covers 26.

What are the 26 Critical Illnesses?

Insurance companies in Canada will typically insure the following 26 critical illnesses. It is important to note that there are exceptions for a full payout with each illness.

26 critical illnesses that Canadian Insurance Companies cover
  • Blindness
  • Deafness
  • Loss of speech
  • Loss of limbs
  • Loss of Independent Existence
  • Paralysis
  • Severe burns
  • Aortic surgery
  • Coronary artery bypass surgery
  • Heart attack
  • Heart valve replacement or repair
  • Major organ transplant
  • Major organ failure on waiting list
  • Occupational HIV infection
  • Kidney failure
  • Aplastic anemia

What Does Critical Illness Offer?

Critical illness insurance offers a unique feature called return of premium. Return of premium allows a policy owner to request return of all premiums (known as ROP) paid after a specific amount of time (provided no claim has been made), typically 15 to 20 years, or at age 65 or age 75. The idea is certainly appealing that one could have coverage for an extended period of time, knowing if one remains healthy and no claim is made they will receive 100% return of premium.

Critical Illness Insurance also offers a partial payment benefit (also sometimes called an early discovery benefit). In the event that you develop a non-life threatening or less severe illness that can be treated while you are insured, you are eligible to receive a small payout of your benefit. The payouts are typically 10% to 25% of your policy’s value, and it doesn’t void your policy or reduce your final payout if you do end up also developing one of the defined life-threatening critical illnesses afterwards.

The illnesses that qualify for a partial payment are often forms of non-life threatening cancer and coronary angioplasty, but will vary by each insurance company.

Other features, known as riders to a critical illness policy include disability waiver of premium rider, which eliminates premium payments if one were to become disabled; a second event rider which provides additional coverage (often limited) in the case of a 2nd critical illness; and a loss of independent existence rider.

Individual critical illness policies in Canada are typically offered in terms of 10 years, 20 years, to age 75 or to the age of 100. Similar to life insurance policies the shorter the term the more cost effective the premium. Some insurers also allow policy holders to lock in premiums to avoid future rate increases.

The most popular face amount for a critical illness insurance policy remains $100,000.

However, as with life insurance and disability insurance policies, not all critical illness insurance policies are made equal. Each insurer offers something different which may or may not fit your needs. For example:

  • Manulife Insurance for example offers a LivingCare which provides a monthly care benefit if you become functionally dependent at no additional cost.
  • Ivari (owned 100% through a subsidiary of the Canada Pension Plan) offers competitive critical illness rates, however does not provide stand alone critical illness solutions (only as a rider to a life insurance policy).
  • Desjardins Insurance offers a unique shared ownership critical illness policy where a company’s key employees receive coverage and potential for future return of premium with no tax implications
  • Empire Life which once offered comprehensive critical illness plans, has made a corporate decision to no longer offer critical illness insurance.

It is best to contact a critical illness broker to learn about your options and design a plan that best suits your needs.

Talk to an advisor today.

Best Life Insurance Quotes Canada

What You Should Consider When Applying for Critical Illness Insurance

Recent studies show that an average 25-year-old male non-smoker has a 24 percent chance of having a critical illness (cancer, heart attack or stroke) prior to turning age 65. In other words an average 25 year old male is 3 times more likely to suffer from a critical illness than prematurely dying before the age of 65. Thankfully due to advancements in medical technology, any individual suffering from a critical illness has a much greater chance at recovering than was the case in generations past.

When applying for critical illness insurance there are a few factors to consider and take note of:

Unfortunately a life insurance company is unlikely to pay out a claim if you’ve been diagnosed before applying, however this does not necessarily preclude you from receiving critical illness insurance. It is likely in this scenario the life insurance company would issue a policy if approved with an exclusion, where the policy would not cover the specific critical illness you have been diagnosed with.

Statistics show that 91% of critical illness claims are one of a heart attack, stroke or cancer. Several life insurance companies offer both a “basic” and comprehensive critical illness plan. The basic plan typically only includes the 3 major illnesses and could save you a few extra dollars of premium.
Similar to life insurance coverage, critical illness insurance has terms of 10, 20 years along with ages 65, 75 and 100. The general rule of thumb is the shorter the term (ie. period where the cost is fixed) the more cost effective the coverage. The advice here is to ensure you have the right amount of coverage and extend for a term you are most comfortable with.
Critical illness insurance in Canada has a very unique feature from multiple insurance carriers which allows a return of premium or ROP. ROP allows the owner of the policy to cancel after a specific number of years and receive back 100% of the premiums paid. This can be very enticing as it guarantees coverage for a number of years and allows all money returned if the policy is deemed no longer required or a critical illness claim has been paid.
ROP allows 100% of premium refunded typically after 15 or 20 years or to age 65 or 75. The longer the waiting period is, the more cost effective the ROP enhancement. For example a 35 year old may decide he or she wants coverage to 65 and opts for a return of premium feature after age 65 as opposed to a 55 year old that may opt for return of premium after only 15 years.
As an added layer of cost protection, insurers will allow the owner to add ROP on death which returns all premiums paid in case of premature death.
As an added layer of cost certainty, insurers will allow owners to add a disability benefit which effectively means if the owner suffers from a disability and satisfies a 3-6 month waiting period, the insurance company will cover future critical illness insurance premiums.

If you have a family history of a particular critical illness, the insurance company may deem you at a great risk. Applying from carriers who are “more underwriting friendly” to the specific condition or have a simplified underwriting process may help you successfully place the policy you desire.

Frequently Asked Questions (FAQs)

Critical illness insurance is typically added upon life insurance or other forms of financial protection. The combination of life insurance and critical illness better prepares clients for injuries and possible future debts.

Critical illness insurance is a good way to protect yourself from the financial burden that could be associated with a possible future injury or illness. If you are a major earner for your family, and are young and health, critical illness insurance is a good way to prevent future tragedy.

Life insurance pays out in the event that the insured passes away. This money is provided in the form of a death benefit to the beneficiaries listed in the policy. On the other hand, critical illness insurance pays the benefit to you when you fall ill if the health condition is listed within the protection umbrella of the policy.

No, diabetes is not traditionally incldued in the list of covered health conditions.

A stroke is one of the most common health conditions that is covered by critical illness insurance.

Contact Protect Your Wealth For Experienced Advice

Working with a critical illness insurance specialist can help you find the best solution to fit your particular situation.

We would be happy to provide further analysis for your family’s specific circumstances. Contact Protect Your Wealth today to learn more! We are not only critical illness agents, we are critical illness brokers who are able to shop the market and find the best critical illness life insurance solution for you. We’re proudly based out of Hamilton, and service clients anywhere in Ontario, including areas such as Ancaster, Burlington, and Oakville.

Talk to an advisor today.

Best Life Insurance Quotes Canada