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Are you prepared for the financial impact of a serious illness?
Critical illnesses like cancer, heart attack, and stroke can have devastating financial consequences. The costs of medical treatments, lost income, and lifestyle adjustments quickly add up, leaving you and your loved ones vulnerable.
That’s where critical illness insurance comes in. It gives a cash injection in a time of crisis to provide financial security for you and your family.
In this post, we’ll walk you through purchasing critical illness insurance, from understanding the basics to finding the right coverage that fits your needs and budget.
If you’re considering buying critical illness insurance in Canada, this post is for you.
How To Get Critical Illness Insurance
So you’ve started shopping for critical illness insurance to insure your health. But where should you start? Read our eight step guide showing how you can confidently purchase a critical illness policy.
1) Learn how critical illness insurance works
Before you purchase critical illness insurance, you should understand how it works. A critical illness insurance policy provides a tax-free lump sum payment if you’re diagnosed with one of 25 or 26 critical illnesses.
While the most common payout is for life-threatening cancer, heart attack, stroke, and coronary artery bypass surgery, other illnesses covered include aortic surgery, major organ transplant, multiple sclerosis, kidney failure, and benign brain tumour.
However, critical illness insurance doesn’t cover every major illness. Every policy has exclusions, and it’s crucial for you to understand them so there is no confusion if you need to make a claim.
2) Decide how much coverage you need
Because the insurance company doesn’t restrict how you spend the money, how you use the lump sum benefit payment is up to you. You’ll want to ensure the critical illness benefit is sufficient to:
- Pay for medical expenses not covered by your provincial health insurance
- Cover living expenses for a few months while your income stops
- Make modifications to your home to improve accessibility
- Pay for caregiver expenses to help you perform the activities of daily living
- Cover travel expenses to receive medical treatment from out of town
As you can see, additional expenses after getting diagnosed with a covered condition can add up quickly. Therefore, the average amount people buy ranges from $100,000 to $250,000.
Another reason to get a higher benefit amount is because most critical illnesses happen years later. By the time you need to use the lump sum payment, the amount you bought may not be enough due to the effects of inflation.
3) Choose a term
Like with a life insurance policy, critical illness insurance comes in many term lengths, with the shortest being 10 years and the longest being age 100. In between, you will also find term-20, term-65, and term-75.
Term-10 and term-20 policies start with a lower cost but rise upon renewal after 10 or 20 years, respectively. While they are cost-efficient in the short run, they will be more expensive over the long term.
On the other hand, term-65, term-75, and term-100 policies have level premiums until age 65, 75, and 100, respectively. While they may be more expensive initially, they provide more cost certainty as you age. These critical illness plans are suitable if you want to keep the coverage until retirement or for the rest of your life. In fact, term-100 doesn’t expire when you reach age 100—the coverage continues, but your premium payments stop.
4) Add riders
Riders are optional benefits that you can add for an extra cost. The most common critical illness insurance riders are the return of premium options. These let you get back some or all of the premiums paid into the critical illness insurance plan if you don’t make a claim.
Another rider is the disability waiver of premium, which relieves you from premium payments upon becoming disabled in your occupation. This rider is vital if you don’t have long-term disability insurance, since your income will stop if you can’t work.
5) Get a quote
Now that you know how much coverage you need, the term length, and optional riders to get, the next step is to get a quote. A comprehensive quote lists the covered conditions, definitions of each disease, and the critical illness insurance premiums based on your age, gender, and smoking status.
This is where working with a licensed insurance advisor who has access to many insurance companies will be advantageous. They can pinpoint the insurance provider that best aligns with your needs and budget, offering a critical illness plan tailored to your requirements.
After comparing quotes from multiple insurers, you can be confident that you have selected the optimal plan for securing financial protection.
6) Apply
Next, you can apply for critical illness coverage through an insurance advisor. This step usually takes half an hour and is your chance to ask any questions about the insurance company, critical illness policy, and underwriting.
The last one is essential, because you may have a pre-existing condition that precludes you from buying critical illness insurance. Therefore, it’s best practice to address pre-existing conditions before the application to avoid unpleasant surprises after underwriting, like a decline or rating. More on these in step eight.
7) Underwriting
After the previous step, an underwriter will start to process your application.
Underwriting is how an insurer assesses your risk of developing a covered illness. It involves collecting your personal health factors, like blood pressure, build, cholesterol, and smoking status. Along with your family history and lifestyle, an underwriter will clearly understand your risk level for critical illness insurance.
An essential requirement for the underwriter is a basic medical questionnaire, which is the minimum information they need to assess your risk. Besides medical questions, an underwriter may also request the following:
Medical exam
A paramedical examination typically includes providing blood and urine samples, blood pressure readings, and height and weight measurements. You may also need an electrocardiogram depending on your age and coverage amount.
Attending Physician Statement (APS)
Sometimes, the information you provide about your health on the application is missing key details. Therefore, the underwriter may request a record of your medical history from your family doctor, called the attending physician statement.
The underwriting process usually takes several weeks, although some applications may take longer to underwrite, depending on the scope of your medical history.
8) Policy issue
If the insurance company approves your application, it will offer you coverage based on your risk. If your health and lifestyle fall within the range of a standard risk, you will receive the standard rate, which is the one you were quoted.
However, a medical impairment or lifestyle choice may put you into the high-risk category. In that case, the insurance company has two options to deal with it:
Extra premium
Also called a rating, an extra premium is a percentage applied to the standard rate, which is 100%. For example, a 150% rating means the premium is 50% higher than the standard rate. Insurers often use ratings for insureds with pre-existing conditions like type 2 diabetes, depression, and arthritis.
Exclusion
An insurance company will use an exclusion in one of two ways:
- Exclude a covered critical illness: For example, blindness is a condition covered by a critical illness policy. A blind person applying for coverage will have blindness excluded.
- Exclude a specific medical condition or risk: This one is often used to exclude sports or hobbies that may lead to a covered critical illness occurring, like paralysis or coma.
Once the insurance company issues the policy and you accept the terms, you can pay for it, and your critical illness insurance coverage will be in effect.
If the underwriter deemed your risk to be too high, it will decline your application. To avoid this, you may want to do a preliminary assessment to determine the likelihood of a decline based on your pre-existing condition.
Frequently Asked Questions
Can you buy critical illness cover on its own?
Yes. Although you can get critical illness insurance as a rider on a life insurance policy, most people buy standalone coverage because the savings are minimal even if you buy them together.
When should you buy critical illness insurance?
Once you have an earned income and financial commitments like rent or mortgage payments, groceries, and utilities, it’s time to consider getting critical illness insurance.
Should you purchase critical illness insurance directly from an insurance company?
No. While some insurance providers offer critical illness insurance directly to consumers, these are not the best policies you can get. They usually have limited coverage amounts, are more expensive, and only have a few covered conditions instead of 26.
Do you need to take a medical exam when you buy critical illness insurance?
It depends on your age and coverage amount. The older you are and the higher the lump sum benefit, the more likely you will need to do the medical exam.
Is critical illness insurance worth it in Canada?
Critical illness insurance is a wise investment if you are concerned about the costs associated with suffering a covered condition. For a low monthly premium, you have peace of mind knowing you have a financial safety net to pay for these expenses.
Can you add critical illness coverage after you buy it?
No. You cannot increase the coverage amount on a policy after you buy it. The only way to get more coverage is by buying a new policy.
Why can't you buy critical illness insurance?
There are several reasons why an insurance company may decline to offer you coverage. Some of the most common ones are due to your health and medical history, although the diagnosis of a major medical condition in a family member may also impact your eligibility for critical illness insurance.
Ready To Buy Critical Illness Insurance?
In conclusion, critical illness insurance is an essential investment for anyone who wants to safeguard their finances against the unexpected. By following the steps outlined in this post, you can choose the right critical illness insurance plan that fits your needs and budget.
Contact us at info@briansoinsurance.com or 604-928-1628 for a no-obligation consultation on obtaining coverage. If you already know the type of critical illness coverage you want, skip to the bottom and request a quote. We will shop the market for the best critical illness insurance policy at the lowest price from reputable insurance companies in Canada.
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.
Thank you for this comprehensive guide on purchasing critical illness insurance! It’s often an overlooked aspect of financial planning, yet it can be incredibly valuable in protecting oneself and loved ones during challenging times. Your breakdown of the key considerations, such as understanding coverage options, evaluating policy features, and comparing quotes, provides valuable insights for anyone navigating this complex insurance landscape.