Critical Illness Insurance
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Critical illness insurance is a popular product in Canada. But be cautious! You must be knowledgeable on what is covered; it may not be what you believe. Furthermore, your broker may not be able to dive down to this level. Therefore make certain you do.
If you’d like a personal consultation on critical illness at any time, please book an appointment with us here.
What is critical illness insurance?
We believe that most Canadians do not have critical illness insurance because they do not understand how it works or how important it is. When you consider all of the numerous types of insurance policies available in Canada (home, auto, cell phone, life, disability, and so on), critical illness insurance is undeniably one of the most significant. Why? It’s because you are merely insuring your health. What matters more than your car and your house? Your health is the most essential thing you have, and when you don’t have it, financial assistance will undoubtedly help you recover.
If you are diagnosed with one of the policy’s eligible conditions, critical illness insurance will give you a one-time, lump sum payment. A comprehensive policy covers up to 26 conditions, however the number of conditions covered might range from three to twenty-five. The three most common diseases that result in claims are heart attack, stroke, and cancer.
Most policies include a 30-day waiting period, which indicates that the insurance benefit amount (e.g., $100,000) is paid out 30 days after a covered condition is diagnosed. It aims to provide you with financial assistance when you are most in need. Do you have enough finances set aside to cover your loss of income and increased bills / expenses if you were diagnosed with cancer today and were unable to work due to treatment for the next 12 months? Most Canadians do not, which is why everyone should think about getting critical sickness insurance.
How Critical Illness Insurance Works?
Critical illness insurance does not have to be as tough to comprehend as many people think. Essentially, you obtain a policy, and if you receive a diagnosis with one of the specified illnesses, the insurance company will send you a tax-free payment that you can spend anyway you want. There are no restrictions on how you can use the money. It is entirely yours, and you are free to do whatever you choose with it.
If you are thinking about buying critical illness insurance, there are a few things you should know first:
– Amount of coverage: How much tax-free money do you need, if you are diagnosed with a critical disease and are unable to work for the next 6-12 months? Many people will apply for coverage based on their annual income because it will allow them to take at least one year off from work. This quantity, however, varies from person to person.
– The type of policy. There are various policy kinds available (similar to life insurance). Do you require coverage for a period of ten years? Do you require coverage till you retire? Do you require coverage for the rest of your life?
The Advantages of Critical Illness Insurance
There are numerous advantages to getting critical illness insurance, which is why it has grown in popularity in Canada.
– Mind at ease. Gives you piece of mind knowing that if you are diagnosed with a covered condition, you will get a lump sum of tax-free cash.
– Comprehensive Coverage. Policies can cover up to 25 different medical problems. The three most common conditions are heart attack, stroke, and cancer.
– Tax-free. If you file a claim, the insurance company will pay you your benefit amount tax-free.
– No restrictions. You may spend the money from a claim in any way you see appropriate; there are no constraints or restrictions on how you may spend the money from a claim.
– Customization. Policies are customizable, allowing you to ensure that they meet the needs of you and your family. Need a low-cost premium to get started? Consider a ten-year contract. Looking for long-term coverage that will last until retirement? Consider coverage up to the age of 65 or 75.
– Renewable. The majority of critical illness insurance firms include a policy renewal option.
– Convertible. The majority of critical illness insurance firms include a policy conversion option.
Types of Critical Illness Insurance
In Canada, there are various types of critical illness products available. The product types are comparable to life insurance in that you can buy both term and permanent policies. A 10 year term policy with level premiums (the cost of the policy) and level coverage amount for 10 years is the most affordable critical illness insurance policy. Longer term durations, such as a 20-year term or a 25-year term, are also available.
If you need coverage for more than 25 years, you can check into policies that provide coverage until the age of 65, 75, or even 100. These plans can also include a “rider” (additional benefit) for an additional cost, which is known as return of premium. Return of premium allow the policy owner to receive all of the money they paid for the policy back if they do not make a claim.
It is strongly advised that you speak with one of our professional advisors to review your current status and needs in order to determine which product is best for you.
Is Critical Illness Insurance worth it?
Are you going to be financially impacted if you are diagnosed with a serious illness and are unable to work? Can you afford the unexpected costs associated with a critical illness (travel, house modifications, medical bills, etc.)? If you will be financially impacted when you are diagnosed with a critical illness, you should strongly consider obtaining critical illness insurance.
Renewable Option
Policies that automatically renew at the end of the term are known as renewable term life insurance policies. In the eleventh year of a ten-year term life insurance policy, the insurance will automatically renew for another ten years (but at a higher rate). Renewal ability was once a key aspect of term life insurance, but it has become less so in the last 15 years. Essentially, every life insurance company in Canada provides this choice. The problem is that the renewal premiums are so high that most customers are unwilling to pay them. Renewal prices were substantially cheaper up until the mid-1990s, so it made sense to just renew your term policy rather than start shopping for a new one during that time. However, it is not the same anymore. It’s necessary to check the premium of a new policy before renewing your policy if your health is in good condition.
Convertible Option
Nowadays, convertible option remains a key component in term policies. Convertible term critical illness insurance is a policy provision that allows you to exchange your term policy for a permanent policy without having to take a medical exam (up to a certain age). Consider this provision to be a ‘waiver of medical evidence’ option. While this may not be a feature you wish to utilize, it is a must-have provision for use in some worst-case scenarios.
For example, if you keep a term life insurance policy and later develop a medical condition that makes you uninsurable, a convertible term life insurance policy allows you to convert your term policy to a permanent life insurance policy without having to take a medical exam. Most Canadian life insurance providers include free conversion option with their term policies.
Summary
Critical illness insurance is an excellent product that should be taken advantage of by the majority of Canadians. There are lots of ways for setting up policies to make them more affordable to the common Canadian. Every year, the possibility of being diagnosed with a critical illness increases. Why not ensure that you are financially covered if something unfortunate occurs? Make sure you have a peace of mind knowing that if you are diagnosed with the covered condition, your financial condition will be fine. Sadly, none of us are invulnerable. Please contact us if you would like more information on critical illness insurance.
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FAQs - Critical illness insurance
The covered illnesses vary among insurance providers, but common conditions include cancer, heart attack, stroke, organ transplantation, kidney failure, and major surgeries. It’s essential to review the policy to understand the specific illnesses covered.
Health insurance covers medical expenses, such as doctor visits and hospital stays. Critical Illness Insurance, on the other hand, provides a lump-sum payout upon diagnosis of a covered critical illness, which you can use for various purposes, including medical bills, mortgage payments, or other financial needs.
Yes, you can use the lump-sum payout for any purpose, including medical expenses, mortgage or rent payments, utility bills, childcare, or any other financial needs that may arise due to your illness.
It’s a good idea to consider Critical Illness Insurance when you have dependents, a mortgage, or other financial responsibilities that would be challenging to manage if you were to experience a critical illness and couldn’t work.
While some insurance companies offer standalone Critical Illness Insurance policies, it’s also common for it to be offered as a rider or add-on to a life insurance policy. This allows you to customize your coverage according to your needs.
The cost of your premium is influenced by factors such as your age, health history, lifestyle choices (like smoking), coverage amount, and the length of the policy term.
It depends on the policy terms. Some policies allow for multiple claims for different illnesses, while others might only allow a single claim. Review your policy details to understand its limitations.
It’s possible, but pre-existing conditions might be excluded from coverage initially. It’s crucial to discuss your medical history with your insurance provider to understand the terms and any potential exclusions.
Yes, some insurance providers offer Critical Illness Insurance specifically designed for children. This coverage can help ease the financial burden if your child is diagnosed with a covered critical illness. Check with your insurance company for more information.
Most Critical Illness Insurance policies have a waiting period after the policy is purchased. This waiting period, often referred to as the “survival period,” ensures that the policyholder is eligible for a claim only if they survive a specified number of days after the diagnosis.
Premiums for Critical Illness Insurance can be structured in different ways. You can choose a policy with level premiums, where the premium remains constant throughout the policy term, or with age-based premiums, where the premium increases as you get older.
Yes, you can typically cancel your policy, but the process and any associated fees or refunds depend on the terms of your insurance provider. Keep in mind that canceling the policy means you’ll lose the coverage and potential benefits.
Absolutely. Critical Illness Insurance can be especially valuable for self-employed individuals who might not have employee benefits to rely on. It can help cover personal and business expenses if a critical illness prevents you from working.
The need for medical exams varies by provider and policy. Some policies may require medical underwriting, including a medical history review and potentially a medical examination, while others might offer simplified underwriting without medical tests.
Many policies offer the option to increase your coverage amount, often during specific life events (marriage, childbirth, etc.), without needing to go through medical underwriting again. Check with your insurance provider to understand their policy on increasing coverage.
If you outlive the policy term and haven’t experienced a covered critical illness, the policy generally doesn’t provide any benefit. However, some policies may offer a return of premium option, where a portion of the premiums paid is returned to you.