If you receive a critical illness diagnosis, your government and employer health insurance plans will provide coverage for certain treatment and recovery costs. However, it’s crucial to be aware of the extra advantages offered by Critical Illness Insurance, which you might not be familiar with. Considering its additional benefits, is it worthwhile to include Critical Illness Insurance in your coverage?
What is Critical Illness Insurance?
Critical Illness Insurance is a form of insurance that offers a lump sum payment to the policyholder upon being diagnosed with a severe, life-threatening condition like cancer or Parkinson’s disease. The payout is made immediately upon diagnosis and can be utilized for any purpose the policyholder deems necessary, irrespective of its direct connection to their illness. For instance, the payout can be used for various purposes such as:
- Home adjustments, such as installing ramps and no-barrier showers
- Replacing the income of the policyholder’s spouse or partner if they need to stay home to provide care
- Receiving nursing or personal support worker (PSW) care at home
- Acquiring mobility aids
- Pursuing alternative treatments like acupuncture or therapeutic massage
- Covering travel and lodging expenses if treatment facilities are not nearby
- Enabling additional childcare support
- Accessing mental health care services
Critical Illness Insurance ensures financial support during challenging times, offering the flexibility to address the specific needs that arise when coping with a serious illness.
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 transplants, multiple sclerosis, paralysis, and Parkinson’s disease.
- The remaining 3% are less common critical illnesses.
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 up to 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.
What Does Critical Illness Offer?
Critical illness insurance offers a unique feature called “return of premium”
- Return of Premium (ROP) allows policy owners to request a refund of all premiums paid
- ROP is available if no claims have been made
- Typically, the refund can be requested after 15 to 20 years or at age 65 or age 75
- The policyholder can enjoy coverage for an extended period with the assurance of a 100% premium refund if they stay healthy and do not make any claims
Critical Illness Insurance also offers a partial payment benefit: (also sometimes called an early discovery benefit).
- Non-life threatening or less severe illnesses can be treated while insured
- Eligible for a small payout (usually 10% to 25% of policy value)
- This payout doesn’t void the policy or reduce the final payout if a life-threatening critical illness is later diagnosed
The illnesses that qualify for a partial payment are often forms of non-life threatening cancer and coronary angioplasty, but this will vary by each insurance company.
Other features/benefits, known as riders, to a critical illness policy can 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 (they only offer critical illness 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.