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.
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.
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.