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Have you ever considered what would happen if you were diagnosed with a critical illness? Medical expenses, lost wages, and other financial obligations can quickly add up and cause significant stress during an already challenging time.
Critical illness insurance can help ease this burden by providing a lump-sum payment in the event of a severe illness. But how much does critical illness insurance cost? And is it worth the investment?
In this post, we will explore the factors that impact the cost of critical illness insurance and provide tips for finding the best policy for your needs. With this information, you can make an informed decision about whether critical illness insurance is right for you and your family.
- Key takeaways:
- Critical illness insurance provides financial security by paying you a lump sum benefit if you are diagnosed with a covered condition.
- The cost of critical illness insurance depends on many factors, including your age, gender, smoking status, lifestyle, health, and family history.
- While term-10 policies have the lowest initial cost, they may not be the best long-term option as premiums increase every 10 years.
How Does Critical Illness Insurance Work?
Although the survival rates of cancer and other critical illnesses have improved over the years, their financial impact hasn’t. A life-threatening illness may interrupt your income and cause unexpected medical expenses, wreaking havoc on your retirement plans. Therefore, many people choose to buy critical illness insurance to alleviate the financial stress of a serious illness.
When you own a critical illness insurance policy, an insurance company pays you a tax-free lump sum payout if you’re diagnosed with a covered condition. How much you get depends on the coverage amount you bought. While you can use the benefit however you want, most people choose to replace lost income and cover medical expenses so they can focus on recovery.
What does critical illness insurance cover?
Most critical illness insurance plans have 25 to 26 conditions covered. These include life-threatening cancer, heart attack, stroke, and coronary artery bypass surgery, which account for most claims. Other illnesses covered include aortic surgery, major organ transplant, and kidney failure.
Some critical illness plans only cover the four major diseases. Although these policies cost slightly less, fewer life insurance companies offer them because of their limited coverage.
What does critical illness insurance not cover?
Because critical illness insurance coverage targets 25 or 26 specific diseases, any medical diagnosis that doesn’t meet the definition isn’t covered.
Every critical illness policy also has exclusions, so you wouldn’t receive a benefit even if you were diagnosed with a covered condition. For example, intentional self-inflicted injuries and drug use other than as prescribed and taken following the instructions of a medical doctor are not covered.
Who needs critical illness insurance?
While the most crucial person in the family to be covered is the breadwinner, other family members can also benefit from critical illness insurance coverage. That’s because a serious illness to a non-income earning spouse or children can also result in devastating financial consequences.
Does critical illness insurance cover pre-existing conditions?
It depends on the medical condition. For example, invasive cancers, strokes, and heart attacks would result in an automatic decline.
Some pre-existing conditions are acceptable, although you may have to pay a higher rate to account for your increased risk of a critical illness diagnosis. For example, being overweight, having high blood pressure or cholesterol, and having a mental disorder may result in a rated policy.
An underwriter will review your medical history to determine whether to offer your critical illness insurance coverage.
How Much Does Critical Illness Insurance Cost In Canada?
One of the main factors in determining your cost is the amount of coverage, so let’s look at that first.
How much critical illness insurance do you need?
You want sufficient critical illness coverage to provide a financial safety net if you were diagnosed with a covered condition. As such, you’ll want to make sure there’s enough to pay for medical and caregiver expenses, replace your income for a few months, modify your home to improve accessibility, and travel out of the country for medical treatment, if necessary.
The average amount people get is $100,000, although coverages between $50,000 and $250,000 are common too.
Factors that affect the cost of critical illness insurance
Your age, gender, and smoking status are the only three pieces of information you need to get a critical illness insurance quote. However, that price, also called the standard rate, is for the average person with those attributes. You won’t know the final cost until an underwriter reviews your health, family history, and lifestyle.
What is the least you can pay for $100,000 of coverage?
While there are many types of critical illness insurance policies, term-10 has the most affordable premiums. With term-10, the price is guaranteed level for the first 10 years. As you age, your chances of a critical illness diagnosis increase. To account for this, the critical illness insurance rates increase from years 11 to 20 and so on for years 21 to 30 and beyond. Most term-10 policies expire at age 75.
Below is a table showing the monthly cost of a term-10 policy for $100,000 of coverage for the first 10 years.
Age | Male non-smoker | Male smoker | Female non-smoker | Female smoker |
|---|---|---|---|---|
25 | $25 | $30 | $25 | $27 |
30 | $29 | $37 | $28 | $31 |
35 | $33 | $50 | $34 | $47 |
40 | $44 | $78 | $46 | $75 |
45 | $64 | $133 | $63 | $117 |
50 | $97 | $223 | $86 | $167 |
55 | $160 | $374 | $133 | $258 |
60 | $251 | $556 | $184 | $357 |
65 | $407 | $932 | $279 | $560 |
Although smokers only pay slightly more than non-smokers for those under 40, the gulf between the two widens considerably past the mid-40s.
Also, men and women pay around the same prices up to age 45. After that, the premiums for men become more expensive than for women.
What are the most affordable critical illness insurance policies over the long term?
While term-10 provides the lowest initial cost, the rate hikes every 10 years make it more expensive than other critical illness insurance plans over the long term. The other common options are term-20, term-75, and term-100.
With term-20, the critical illness insurance premiums are guaranteed level for the first 20 years. When you renew the policy in year 21, the cost will be higher than the first 20 years. This rate will remain the same from years 21 to 40. Like term-10, the policy usually expires at age 75.
Term-75 doesn’t have the same rate increases as term-10 and term-20. Instead, the cost is level until age 75, when the critical illness insurance policy expires.
Similarly, term-100 has level premiums until age 100, although it doesn’t expire. Instead, the policy becomes paid up, meaning no more payments are required to keep the coverage in force. Hence, term-100 is the only permanent critical illness insurance plan.
So, how does the cost of these critical illness insurance plans stack up over the long term? Let’s take a look at the monthly premiums for $100,000 of lump sum benefit for a 25-year-old non-smoker:
Term-10
Years | Male | Female |
|---|---|---|
Years 1-10 | $25 | $25 |
Years 11-20 | $36 | $35 |
Years 21-30 | $70 | $69 |
Years 31-40 | $184 | $151 |
Years 41-50 | $504 | $326 |
Total premiums paid to age 65 | $33,789 | $33,620 |
Total premiums paid to age 75 | $98,291 | $72,781 |
Term-20
Years | Male | Female |
|---|---|---|
Years 1-20 | $27 | $27 |
Years 21-40 | $111 | $101 |
Years 41-50 | $504 | $334 |
Total premiums paid to age 65 | $33,221 | $30,758 |
Total premiums paid to age 75 | $93,722 | $70,880 |
Term-75
Years | Male | Female |
|---|---|---|
Years 1-50 | $58 | $55 |
Total premiums paid to age 75 | $34,884 | $33,048 |
Term-100
Years | Male | Female |
|---|---|---|
Years 1-75 | $67 | $65 |
Total premiums paid to age 100 | $60,426 | $58,725 |
As you can see, although the initial costs of term-10 and term-20 are lower, you end up paying much more toward the end of the policy, especially in the last 10 years. However, if you only want to keep the critical illness coverage until the standard retirement age of 65, the total premiums paid end up much closer.
Although this table only shows the comparison for 25-year-olds, other ages follow a similar pattern.
Takeaways from the critical illness insurance rate tables
So, what can we conclude from these tables?
First, the longer you wait to buy critical illness insurance, the more it costs, especially for smokers. This is true for all types of insurance, including life and disability insurance. Although the critical illness insurance rates don’t increase too much when you’re younger, they rise more dramatically after you reach 40 and become unfeasible after you reach 60.
Second, you want to think long-term when you buy a critical illness insurance policy. Do you want lifetime coverage for peace of mind in your golden years?
Or do you only plan to keep it for 10 or 20 years? If you only want critical illness coverage for the short term, a term-10 or term-20 policy makes the most sense. If you desire coverage until age 75, then term-75 is the most cost-efficient. Lastly, because most critical illnesses occur in the later stages of life, you may want to get a term-100 policy to cover your whole life.
Another thing to consider is most critical illness insurance policies are convertible, meaning you can change a term-10 or term-20 policy to a term-75 or term-100. The advantage of this option is conversion does not require any medical underwriting, although the rates will be based on your age when you exercise the conversion option.
This lets you start with a more affordable term-10 or term-20 option and convert it to a longer-term critical illness plan when you have greater financial flexibility.
When should you buy critical illness insurance?
As you can see, critical illness insurance premiums are much lower when you are young. It’s also when the financial protection it provides is the most valuable. That’s because your savings are low and financial obligations are high.
Another reason to buy critical illness insurance while you’re young is to lock in your health. As we age, our health typically declines, making it more challenging to qualify for coverage. Since your family history also factors into your ability to get critical illness coverage, your parents or siblings being diagnosed with a serious illness may put your eligibility at risk.
Is critical illness insurance worth it?
Considering the financial consequences of not having coverage, the peace of mind a critical illness insurance policy provides is well worth it. Even if you have long-term disability insurance, the benefit may not start until after a 90-day waiting period, leaving you in a difficult financial situation during the first few months.
Need A Critical Illness Insurance Quote?
Critical illness insurance is a valuable type of coverage that can provide financial support when you need it the most. Understanding how much it costs is vital to deciding whether it is a good investment for you. The price depends on various factors, including your age, health, lifestyle, and coverage amount. The type of critical illness insurance plan also plays a role in determining your rate.
It’s essential to shop around and compare policies from different providers to ensure you get the best deal. Don’t just look at the premium, but also consider each policy’s benefits, such as the types of illnesses covered.
Ultimately, the cost of critical illness insurance should be viewed as an investment in your financial future and peace of mind. By taking the time to research your options and find the right policy for your needs, you can protect yourself and your family from the potentially devastating financial impacts of a serious illness.
Contact us today at info@briansoinsurance.com or 604-928-1628 for a free consultation. We will guide you through the process of selecting the right policy and coverage amount. If you want to start with a quote, fill in the form below, and you will receive it in your inbox.
Get Your Critical Illness Insurance Quote Now
While we make every effort to keep our site updated, please be aware that timely information on this page, such as quote estimates, or pertinent details about companies, may only be accurate as of its last edit day. Brian So Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser. This post is a brief summary for indicative purposes only. It does not include all terms, conditions, limitations, exclusions, and other provisions of the policies described, some of which may be material to the policy selection. Please refer to the actual policy documents for complete details which can be provided upon request. In case of any discrepancy, the language in the actual policy documents will prevail. A.M. Best financial strength ratings displayed are not a warranty of a company’s financial strength and ability to meet its obligations to policyholders.
