Is Critical Illness Insurance Right for You?

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

6 Minute read

Originally Published: July 1, 2021

Updated: August 3, 2023

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.

6 Minute read

Originally Published: July 1, 2021

 Updated: August 3, 2023

Applying for Life Insurance With Diabetes in Canada

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.
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 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.

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 (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.

Talk to an advisor today.

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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% 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. This means that if you were to be diagnosed with another covered critical illness, they would still pay out for that covered illness.

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.

Simplified Issue policies involve minimal medical underwriting, eliminating the need for extensive medical exams or lengthy questionnaires for applicants. These policies are suitable for individuals with pre-existing conditions, those seeking swift approval, and those who prefer to avoid lengthy applications and waiting periods.

Frequently Asked Questions (FAQs)

Critical illness insurance is typically added upon life insurance or other forms of financial protection. Critical illness provides additional protection in the case you develop a critical illness and need financial help for treatment costs. 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 breadwinner/earner for your family, and are young and healthy but are worried you may develop a critical illness, 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 included in the list of covered health conditions.

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

Certain permanent (whole) insurance policies offer the flexibility to modify your premiums, while others provide premium returns in case no claims are made. If you find flexible premiums beneficial, it’s advisable to examine the policy options available with the one you are contemplating.

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, British Columbia, and Alberta, including areas such as Ancaster, Vancouver, and St. Albert.

Talk to an advisor today.

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