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Critical illness insurance can help you pay for both your usual expenses, as well as additional healthcare costs if you become severely ill. But not all diseases are covered, so you need to consider your options carefully.

In a culture where the mere suggestion that a person may develop cancer or any other serious disease elicits a flurry of superstitious responses to ward off bad luck, critical illness insurance can be a bit of a bogeyman. So, go ahead and knock wood or throw salt over your shoulder, because we’re addressing this topic head-on.

If the unspeakable were to happen, chances are you’d need to take time off work—months or possibly even years—to focus on your treatment and recovery. Aside from the need to replace lost income to cover your usual expenses, you might also require additional funds to cover out-of-pocket healthcare costs, such as uninsured prescriptions or treatments, travel or transportation, home care, and modifications to your home or vehicle.

Critical illness insurance can help you pay for all these expenses—or any other financial needs—until you are well enough to return to work. Here’s everything you need to know about critical illness insurance in Canada.

How Does Critical Illness Insurance Work?

Critical illness insurance covers you for a specific term (commonly 10 years) and pays out a lump-sum tax-free benefit if you should become critically ill during the coverage period. In many ways, it’s similar to life insurance, but the benefit is paid to you while you are alive and sick, rather than to your heirs after you die.

A critical illness policy, which is an agreement between you and an insurance provider, will specify the details including which conditions are covered (up to 26 illnesses), how long you must be sick before you can make a claim (up to 30 days), and the amount of the benefit coverage you would receive.

In turn, you pay monthly premiums to keep the policy active and the coverage in place for the duration of the term. Your premiums will stay the same for the entire term. When the term is over, you may be able to renew coverage for another term, but the premiums will likely increase as the cost of critical illness insurance increases with the age of the person insured.

Best Critical Illness Insurance in Canada

To make sure you get the coverage you need at the lowest price, we suggest using an online search platform. This allows you to compare quotes and policies from the country’s top critical insurance providers, with the utmost speed and convenience.

Here is Canada’s top critical illness insurance comparison website:

BrandProvinces servedNumber of insurance providersOnline ApplicationVisit Site
PolicyAdvisorOntario, Alberta, Manitoba20YesVisit Site

PolicyAdvisor

PolicyAdvisor.com policy advisor insurance allows you to get quotes from 20 different insurance providers, and even has a calculator to help you determine how much critical illness insurance coverage you might need. Then you can view, save and compare policy details side-by-side, as well as submit an application for coverage online. For now, PolicyAdvisor serves Canadians living in Ontario, Alberta, and Manitoba, but may expand to other provinces in the future.

Learn more about PolicyAdvisor

How Much Critical Illness Coverage Do You Need?

As is the case with life insurance, your coverage needs depend on many factors—not the least of which is your level of savings. If you have a large emergency fund that could cover your day-to-day expenses and additional healthcare costs while you are receiving treatment for a severe illness, you may not need any critical illness insurance.

If, on the other hand, you and/or your family might quickly slip into bankruptcy, lose your home, or have to exhaust retirement funds to stay afloat if you were ill and unable to work for a given period, critical illness insurance may be warranted.

Since this type of insurance is meant to help pay for expenses only while you are sick, the coverage amount you need should be lower than for life insurance, which is meant to replace all your future income after your death.

Critical Illness Insurance Calculator

There are also calculators that will help you determine the right amount of coverage for your circumstances, based on several factors including your income, length of the recovery period, and estimated expenses.

Is Critical Illness Insurance Worth It?

Aside from the level of coverage, there are several other things insurance companies take into consideration when setting your premiums. These include the policy term (the longer the term, the more you’ll pay), the number and/or types of illnesses covered, as well as your age, gender and overall health (including whether or not you’re a smoker).

If you find that your premiums would stretch your budget too far, consider purchasing a smaller amount of coverage, which is still better than no coverage—and much smarter than taking the risk of defaulting on your payments and letting the policy lapse.

Alternatively, you could also look into disability insurance coverage, which is generally cheaper than critical illness insurance but pays a monthly rather than lump-sum payout, as explained below.

Critical Illness vs. Disability Insurance

Disability insurance is quite different from critical illness insurance, in that it’s only meant to replace a portion of your monthly income if you are unable to work due to an illness or accident. As such, it may help you pay for your usual day-to-day expenses, but likely won’t be enough to pay for any additional costs resulting from a health condition. That’s where the lump-sum critical illness insurance benefit can really help.

More specifically, here are how the coverage and benefit payments differ between the two types of insurance:

Disability Insurance

  • Covers you for any illness or injury that prevents you from working
  • Coverage is based on a percentage of your usual monthly income
  • Benefits are paid once a month

Critical Illness Insurance

  • Covers you for a limited number of severe conditions
  • Coverage can be any amount (not based on income)
  • Pays a lump-sum benefit upfront

Critical Illness Insurance: Pros and Cons

As with any insurance product, there are advantages and disadvantages to critical illness insurance. Here are the pros and cons you should consider:

Pros

  • Covers up to 26 serious illnesses, including cancer, heart attacks and strokes, so you can focus on recovery instead of worrying about your finances
  • Benefits are paid out as a tax-free lump sum
  • The money can be spent on anything, not just healthcare expenses
  • Amount of coverage is flexible
  • Premiums are guaranteed for the entire term
  • Some policies have “return of premium” options, which pay back your premiums if you don’t make a claim or die before the term is up

Cons

  • Premiums can be higher than other types of insurance
  • Not all diseases are covered, and some covered illnesses have exclusions
  • You may not qualify for coverage if your health condition is poor

The Last Word 

In Canada, we are lucky to have publicly funded health care, which makes critical illness insurance less of a necessity than it might otherwise be. For the most part, Canadians will receive care and treatment for whatever ails them, without the fear of facing a large hospital bill. Furthermore, if you also have supplemental health insurance, many of the typical out-of-pocket expenses—such as prescriptions or private care, may also be taken care of.

The main reasons, then, to get critical illness insurance would be as a replacement for your income while you cannot work, and to pay for larger costs such as retrofitting your home, if necessary. If you have a slush fund for emergencies, you might be better off with disability insurance, which is cheaper and more comprehensive.

Be sure to use online search platforms such as PolicyAdvisor to compare the costs and coverage details of both critical illness and disability insurance, to see whether one or both types of policies would be most advantageous for you.

While you’re at it, take a look at quotes for life insurance, which many providers are making temporarily available without the usual medical tests due to the physical distancing measures implemented for COVID-19. In fact, you can even add critical illness insurance as a rider to your life insurance policy.

Finally, get all your ducks in a row by creating an online will. Providers such as Willful offer a fast, inexpensive and convenient service that helps you create a legal online will to ensure your wishes are followed when it comes to your estate. When you sign up for Willful, use the promo code YOUNGANDTHRIFTY and get $20 off any Willful plan.

Article comments

46 comments
Fania says:

This is for the person, I believe Lev, who says he is an insurance advisor, but doesn’t believe in the value of CI.
Do you know people who were affected by a critical illness like cancer, heart attack or stroke?
I would guess no. If you had you would know the financial impact it has on the family.
When one suffers a critical illness, family members need to take time off work to look after them, they may need to hire help to look after the children, they may need to buy tickets and take time off work to fly in to support a loved one, or simply hire help to have a mental and physical break from caring for someone with a critical illness.
This is another huge reason why to have CI.
And sorry to say that if you ,as a financial professional are asking questions like that, I feel sorry and sad for your clients.

Jimmy says:

Hi Brain,

You neglected or forgot to mention, that even though it pays about 60% of your salary, it’s tax free. That’s because the premiums were already taxed. Would I be paying the 40% income tax anyways. So I don’t think I would be changing what I’m already doing now as far as retirement savings.

Think of it this way: Critical Care Insurance is a lottery that gives you a one time payout. And Disability Insurance covers your income so you can support you and your family ’till you’re 65 years old.

My employer covers 2 years own occupation, and after that, if there is a job I can work sitting down, I will gladly work and be a productive member of society.

Hello Jimmy,

It’s hard to say what you should have since I don’t know your situation.

Disability is important. If you have to take time off work disability may pay 66% of your income. How would you make up the difference? Would you stop contributing to your RRSP? Would you withdraw? RRSPs and TFSA’s don’t protect your family unless you have a lot of money and plan on withdrawing them. If you do this early in life the money you withdraw will be multiple times greater over your lifetime.

Think of it this way life insurance is because you love your family. Critical illness insurance is because you love yourself.

Jimmy says:

Brian,

You keep on saying you have sold tons of CI policies to doctors. But they have lots of disposable income.

I don’t have a doctor’s income. I have to make hard choices on life insurance, disability, RSP and TFSA. I couldn’t make CI contributions fit in my limited budget.

As far as I’m concerned, Critical Care Insurance a nice to have but there are more important areas I had to focus on first to protect and provide for my family when/if I cannot.

Jimmy

Shawna Somerville says:

I have worked in the industry for 8 years now, and I have seen critical illnesses affect both those close to me, and complete strangers. I am cannot urge the importance of CII enough! I myself have Critical Illness, Disability Insurance and Life insurance, and as soon as my daughter was old enough (6 months) I purchased Child CII for her as well (and have most recently purchased life insurance). Sure, Life Insurance is great, but people just don’t realise (because they haven’t been educated) just how important a Living Benefit is. Survival rates have been on the rise since the 80’s; more and more people are surviving heart attacks, stroke and cancer but so have diagnosis so it only makes sense that you would want to protect yourself financially in the event that an illness strikes, without the possibility to have to withdrawal cash (with heavy tax implications) from your RRSP’s.

Let me know if you want the 411 on it vs group disability.

Kyle says:

Will do Brian, thanks!

Thanks Kyle,

I tried that but I believe there is no information on disability insurance,
correct?

Brian

Kyle says:

I actually don’t remember writing about it off the top of my head tbh!

I am trying to find your blog on disability insurance. Is there a serach bar for this?

Thanks,

Brian

Kyle says:

I prefer to just use the Google Search feature to find stuff on any sight Brian. Simply type in the website into the search bar, then leave a space and enter in the term you want to search for within the site.

Lev,

Disability is important, however if you are self-employed and say had a heart attack you are going back to work in many cases within a month. In the end no one product is perfect.

I can tell you I have sold this to Doctors as well.

The question is really do you know what one’s health is going to be in the future? Look at the chart above. The odds of a heart attck stroke, cancer etc. is high.

RBC has dropped their coverage for permanent Critical illness insurance.

http://www.advisor.ca/news/industry-news/rbc-exits-permanent-insurance-81965

“RBC is suspending new sales of its permanent insurance products effective June 23, 2012, citing the current economic and regulatory environment.

The decision comes on the heels of similar changes made by some insurance companies, and confirms a pattern of companies trying to de-risk their long-term offerings”.

Lev says:

Thanks for the reply Brian.

I’m an advisor as well. I asked you the question because I guess I’m kind of ambivalent about CI.

I also recently read a good critique of it online, I’ll have to find the website and link it here, but the guy was saying that he sees CI as more like a lottery: of course anyone would like to have a bunch of money paid to them in case something bad like a disease happened to them, but question remains: what actual financial impact does a CI have on somebody? I thought here in Canada our health care is paid for through our taxes? Therefore, what else is there? It would seem to me that it is critical to protect your income through DI, that is certain. If you’ve got the income coming in, then isn’t that the most important thing?

The video you posted is nice to see and sincere and everything, but the only way that I noticed that he says the CI helped him financially is that it helped him pay for transportation to his treatment; would he have been unable to pay for that without the CI?

In the end I guess it’s just a question of our clients’ budgets: how much disposable income do they have, and what is the best use of that money. If there’s only so much disposable, I would prioritize DI, LI, and savings.

Thoughts?

@ LEV:

“I thought here in Canada our health care is paid for through our taxes?”

Last year in Canada, we spent an estimated $200.5-billion on health services. About 70 per cent of the total, $141-billon, was paid from public coffers and the other $59.5-billion with private insurance and out-of-pocket.

Hello Lev,

Here is an update.

I have a client who had a serious illness. (Back at work within 3 weeks)

Got paid a lump sum. Dave was kind enough to post his thoughts on video.

See link below.

http://www.youtube.com/watch?v=5VOZsO3_kZs

Regards,

Brian

I Thought I’d drop a line and share an experience with one of my clients.

I first sold a $100,000 Critical illness policy to a client who is self-employed about 12 years ago. Later I came back and sold an other $50,000 policy.

In October my client (I will call him Marty). Had a heart attack.
Without going into a lot of details Marty went unconscious the paramedics used a defibrillator and brought him back.

Marty was back at work in two weeks. His disability policy did not pay anything. His critical illness policies paid $150,000.

How important is that?

Look self-employed have it hard. They work long hours. So having cash in the bank means Marty bought time.

Money buys time. How long does it take to have $150,000 cash in the bank? Most people I’d say at least 2 years or longer.

Cheers,

Brian

Lev says:

Brian,

In your example with your client, financially speaking, how did the $150,000 help him? I mean, what specific financial needs, caused by the heart attack, did it help him fill?

Lev

Lev,

In his case this brought him a years worth of income.

He goes down to the US so his travel insurance would be going up in a very big way as one example.

Hi Y&T,

My wife went to a living benefits seminar here in Mississauga. Which covered topics like Critical Illness insurance.

One of the speakers was Brian Goldman Emergency Physician at Mount Sinai Hospital in Toronto.

He talked about the fact Canada’s population is aging rapidly. Out of pocket prescription drugs (new) is beyond the pocket-book of many of us. Five million Canadians can’t find a family doctor. His book is called Night Shift and is the Host of CBC Radio’s White Coat, Black Art.

Another Doctor was Jean Leclerc who talked about the most common cancer for men …prostate Cancer. The value of and methods of early detection. (Which better Critical Illness insurance covers). This is timely since many men are trying to grow a mustache. See http://www.prostatecancer.ca/ for more information.

brian

Teacher Man says:

Thanks for the interesting comment Brian. I am definitely one of the guys growing a mustache to raise awareness.

Reading this article, I think I should surely get critical illness cover as soon as possible. Emergency can arise any moment and instead of standing blank in front of my family, I should be financially strong to support them always and take care of myself too. Thanks for sharing the information.

Here is some information I came across on health care costs

Quick facts on spending:

Canada is expected to spend $191.6 billion on health care in 2010, up from an estimated $182.1 billion in 2009 and $171.8 billion in 2008.
Health care spending is forecast to reach $5,614 per Canadian in 2010, up from an estimated $5,397 in 2009 and $5,154 in 2008.

From: Canadian Institute for Health Information (CIHI).

http://www.cihi.ca/CIHI-ext-portal/internet/en/Document/spending+and+health+workforce/spending/RELEASE_28OCT10

Teacher Man says:

Great info Brian.

Milockm,

I will try to answer your question.

Disability (lets say for example your group coverage) replaces a percentage of your earned income. Usually no more than 60%. If you were in a car accident broke your legs and could not work for 2 months your disability coverage should cover 2 months. Let say you were in a car accident and were paralysized. You’d get up to 60% of your earned income ….which means your lifesyle would change! Critical illness insurance would pay a lump sum.

So if you had both disability and critical illness insurance you may as an example get 60% of you earned income and say $100,000 tax free. Not perfect, but with money, you have some choices.

The key is to consider having both. If you are self-employed and your earned income is low all the more reason to have your own critical illness coverage, since earned income (taxable) is lower than most people who may work for an employer. If you change jobs, most people never review their benefits coverage!!

Does this help?

Brian

Miiockm says:

I had thought many plans included disability insurance as well? Are they usually separate?

Hi Young,

Here is some information for you…

Cancer Causer Found in Coke, Pepsi, Group Says

Hi Young,

I was following. a tweet regarding critical illness insurance. the TD bank sells the most Critical illness policies in Canada (on their mortgages)

Why avoid buying thorugh the TD Bank for this type of insurance?…from their site.

If you’re a Canadian resident between the ages of 18 and 55 and are a new or existing TD Canada Trust mortgage customer, you’re eligible to apply for this unique protection. As long as your mortgage payments are up-to-date, coverage continues until your mortgage is paid off or until you reach age 70.

So you sell your house, pay off your mortgage or switch from say TD to CIBC coverage is gone.

As your mortgage drops so does your coverage!

Less conditions covered. TD… What Critical Illnesses are covered?

Cancer (life-threatening), Acute Heart Attack and Stroke as defined in the Certificate of Insurance. Some restrictions apply

Your own plan same as TD

heart attack,
stroke and
life threatening cancer,
Plus

coronary artery bypass surgery,
multiple sclerosis,
kidney failure,
paralysis,
blindness,
deafness,
rheumatoid arthritis
benign brain tumor
dismemberment / loss of limbs
major organ transplant
Alzheimer’s disease
Parkinson’s disease
motor neuron disease (ALS – Lou Gehrig’s disease)
coma
loss of speech
severe burns
organ transplant (or getting on the waiting list for that)
major head trauma
occupational HIV infection
late onset insulin dependent diabetes
aortic surgery
heart valve replacement
loss of independence

Nice job on this post Brian!

Thanks Ninja!

I hope I am not putting Young’s readers to sleep! I should have added Investors Group and mutual funds to get the comments rolling! I may to get a Heart Defibrillator too!

young says:

@Brian Poncelet- At $1500 a pop for a defibrillator? I hear they have ones that are the size of cell phones now you can carry. 🙂 Haha, you should have. People seem to get riled up about Investors Group. Most of my other posts about talking to your loved ones about what their wishes are weren’t very popular. I guess it’s still taboo, talking about death and disability 🙂

young says:

@TDN- I agree love the picture and the message is clear and very convincing!

Y&T This post rocks! I like the colourful “Deadly results” pic. 😉

Cheers

young says:

This pic was Brian’s idea. I love the picture too- kind of scary. Especially when cancer has recently overtaken heart disease as the number one killer. Cancer’s disability before death is much longer than heart disease, unfortunately.

Juan says:

Life certainly is expensive. Imo with the uncertain stock market returns it may be a good idea to by insurance like this. Savings accounts provide such a low rate of return I would feel much safer buying insurance than praying that I get 7% returns over the next couple decades.

young says:

@Juan- Hmm that’s true, but are you saying that you’re banking on getting a critical illness to receive the cash out? 🙁

Juan,

You really want to do both. First Risk management, disability Life insuance & Critical illness insurance. Remember you need money to retire!

You may want to read my story on annuities. http://www.milliondollarjourney.com/how-annuities-work.htm

If you set this up you will get 8% or better in your mid to late 60’s guaranteed.

cheers,

Brian

Since I am an old guy over 45! I will share my experience.

I bought my first policy when I was 35 (permanent) cost me $100/month for $100,000 which includes return of premium at death. This means if a bus hits me all my premiums I paid go to my wife. If I get a heart attack…live for 30 days I get $100,000.

Later I believe I when I was 40, I felt I needed another $150,000 coverage (of course this cost more and I was rated…which means I pay more!!) I should have done it when I was 35 !!

Anyone who is self-employed or may leave their government job or could be let go, should consider getting this…as our health care crumbles it is nice to have cash when you need it…which of course later in life.

Here is an other reason. Best Doctors http://www.bestdoctorscanada.com/How-it-works.aspx This is included in one’s own policy.

From their website:
“Best Doctors has reviewed tens of thousands of cases and has changed a diagnosis 22% of the time, modified 61% of treatment plans and reduced invasive procedures 67% of the time.”

You may also call Best Doctors if you need help navigating the healthcare system or have questions about your healthcare. Our Best Doctors 360

young says:

@Brian- Interesting. Did you read the article in the WSJ about how Doctors Die Differently?
http://online.wsj.com/article/SB10001424052970203918304577243321242833962.html

They don’t get the most expensive treatment for cancer, they don’t try and fight for their life, they choose to spend their last days with quality of life.
It was a good article and good food for thought.

Interesting I have a surgen who suggested that said the same thing. The problem is you can live for years not months (like the old days) with drugs etc.

So the question is can I work as well as I can if I am sick or wish to slow down?
Do I have the resoures?

A classic example would be a heart attack. One survives but how work this effect one life especially if one is self-employed.

Here is a quote from the Heart and Stroke web site.

http://www.heartandstroke.com/site/apps/nlnet/content2.aspx?c=ikIQLcMWJtE&b=3485821&ct=5055835

Dr. Gustavo Saposnik, a Heart and Stroke Foundation funded researcher, and colleagues looked at 3,631 patients admitted to 11 Canadian hospitals for ischemic stroke (caused by a blood clot). Only 2% of patients died within seven days when they received organized post-stroke care, compared to 22.5% of patients who didn

popthoughts says:

Good post on an important topic. It can be hard to think of addressing these morbid scenarios (like writing a will), especially at a young age, but if you put it off too long and find out you have a condition, it will be too late and you will either not be able to get insurance or pay an arm and a leg for it. One thing to consider is to get a rider where you can get return on your principal at 65 or 75 if you have not made a claim.

young says:

@popthoughts- Couldn’t agree more. My other post on creating a will didn’t receive too much attention lol. I guess my readers don’t like my morbid posts like https://youngandthrifty.ca/relationships-money/national-advance-care-planning-day-start-the-conversation/

Interesting; I need to look into the coverage now that I’m on my girlfriend’s insurance plan! That is a neat graphic; less people died from accidents than I would have imagined. It will be amazing when new medicines and techiques can eventually bring the death rate from disease and cancer down to zero.

One question is what if I get Cancer and live for the next 20 years?
Like stage A prostate cancer?

The lump sum is paid no matter how long you live afterwards.

Brian

young says:

Not to be a pessimist, but I can see us dying or living chronically with disability more often than our parents. We grew up with so many chemicals, toxins, radiation (wifi, cell phones etc.) I wouldn’t be surprised if this happened to us and wouldn’t be surprised if our life expectancy is shorter than our parents. 🙁

Joe says:

I work at 700 University (the building that partially collapsed today — http://www.citytv.com/toronto/citynews/news/local/article/190387–parts-of-ontario-power-generation-building-on-university-collapses). Really glad that I’ve got LTIP.

young says:

@Joe- Oi! Scary stuff! Did anyone get hurt?