What is Critical Illness Insurance?

It always surprises me how few people know about Critical Illness Insurance. Especially with half of Canadians expected to develop cancer and heart disease claiming 33,600 lives each year in this country. Do you think getting a cheque for $50,000 would help if you were diagnoses with one of these, or other serious illnesses? On that note, we’re going to talk about what critical illness is.

Critical Illness Insurance is a type of insurance policy that will pay you a lump sum of money if you survive a heart attack, stroke, cancer, and other diseases.

It’s meant to help cover the time you’ll have to take off of work, making changes in your home to adapt to your new lifestyle, or even going on vacation to celebrate the fact that you survived!

Many companies offer Critical Illness, but not all plans are created equally. For example, one company might cover 5 types of diseases where another company may cover 50 different diseases. As per usual, you’ll get what you pay for.

One of the most important things you need to know about these plans are the definitions of each condition.

That’s how the insurance company determines when they’ll pay you. For example, where one company may pay a benefit after you’ve survived a stroke, another company may require the stroke to have been life threatening to pay a benefit  And, again, it’ll be different by company.

There’s somewhat of a standard definition for each disease, but you don’t want to overlook it. This is something that your insurance agent will help you with, so make sure you ask the question.

It is, however, standard that you must survive 30 days after the diagnosis (or event in the case of heart attack, etc.) in order to qualify for the benefit. Typically, after a cancer diagnosis you must survive 90 days before qualifying. 

Can you get critical illness if you’ve had cancer or a heart attack before?

Generally speaking, if you’ve had a critical illness before, as long as you’ve made a full recover, you’ll be able to get this coverage. Just not for the illness you’ve already had. Some companies will even take the risk of covering you for that illness anyways, after a set amount of time of you being healthy (and some proof).

It’s generally a simple kind of insurance, but it gets more complicated if you have a medical condition when you apply.

We’ll use diabetes as an example. Greg had diabetes when he applied for critical illness coverage. Years down the road, Greg suffered a heart attack. Because diabetes can cause heart disease, Greg may need to go for extra tests to see whether the diabetes CAUSED the heart attack. If it did, Greg might be denied because his existing medical condition caused it. If the diabetes didn’t cause it, Greg gets his benefit to use how he’d like.

Please don’t let that detour you from looking into this coverage. You always want to be honest with your insurance agent, ask questions, and communicate with them if you do have to make a claim. But you should be aware of how the coverage works.

Can kids get covered?

They sure can! And it’s crazy how cheap it is.

You can get family coverage before you have kids and those kids could be covered for diseases or disorders they could be born with. It’s an awful thing to think of, but we’re all aware of the reality. Keep the coverage on them and they can be covered into their adult life for quite cheap.

Who is coverage like this good for?

It’s perfect for self-employed people who can’t afford getting personal disability coverage but want to have something if they were critically ill.

For families, like mine, who have had a family member suffer from a disease and worry that it’s genetic, this coverage can bring a lot of peace of mind.

It’s also good for stay-at-home parents, homemakers, and caretakers who may not qualify for disability insurance because they don’t make an income.

And it’s for people who have, in some way, experienced the devastating effects of a critical illness and the lack of financial support available to those who are suffering. Once you’ve seen that happen, you know how important it is to have a plan in place.

Do I have to pay tax on the money?

Nope! It’s treated the same way that a life insurance benefit is. It’s not taxable so you get to use all the money.

How much critical insurance should I have?

That’ll depend on a lot. When you sit down with your insurance agent, they’ll do a Needs Analysis. It goes over how much money you make, how much you spend, and what kinds of benefits you’ll already be able to get if something happened to you. From there, they can help you pick an amount that would be right for you. It’ll also depend on your budget – the higher the benefit, the more expensive.

I always suggest getting a little bit more than you think – having been in this situation myself – because there are a lot of surprise expenses. If you were sick, your partner probably wouldn’t be working – so that’s 2 lost incomes. Making changes to your home if your physical ability changes can also be very expensive. Again, the Needs Analysis form will help.

How do I buy Critical Illness Insurance?

Life Insurance agents sell this kind of coverage. That includes us! We’d be happy to answer your questions and help you find the right plan.

Remember, you’re in control of your financial future.

It takes time and effort to put in plans like this but it’s worth it to know that your family will be taken care of.

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One Reply to “What is Critical Illness Insurance?”

  1. With thanks! Valuable information!
    I have recently been looking for info about this topic for ages and yours is the best I’ve discovered so far.

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