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Critical illness insurance protects your financial plan if you are diagnosed with cancer, heart attack, or another covered illness. It’s crucial in ensuring you have the financial means to endure a severe illness. But what is critical illness insurance, and how does it work?
Read on to learn how critical illness insurance can provide a financial safety net in the event of a serious illness.
How Critical Illness Insurance Works
Critical illness insurance provides a tax-free lump sum payment if you are diagnosed with a covered critical illness, like cancer, heart attack, or stroke. Some critical illnesses have a waiting period, meaning you have to survive for 30 to 90 days before the insurer pays the benefit.
What can you use the lump sum benefit for?
Once the insurance company pays the critical illness benefit, you can use it however you want. Most people use it to cover the following expenses:
Medical expenses: Did you know not all medical expenses are covered by provincial health insurance? For example, you have to pay for prescription drugs out of pocket. Therefore, you can use the benefit to pay for these expenses.
Living expenses: Ongoing living expenses, such as rent or mortgage payments, utilities, groceries, and child care, continue even after you experience a serious illness. Critical illness coverage can pay for these expenses so you can focus on recovery.
Lost income: If you can’t work due to your illness, the payout can be used to replace lost income.
Home modification: A life-altering illness may result in permanent mobility issues. You can use the benefit to modify your home, such as installing ramps or widening doorways.
Caregiver expenses: If you need to hire a caregiver to assist with daily tasks, the payout can be used to cover the additional expenses incurred.
Travel expenses: Travelling out of Canada to get medical treatment in another country is called medical tourism. You can use the benefit to cover the cost of transportation and accommodation.
Add all the expenses in these categories together to figure out how much critical illness coverage you need.
Why is critical illness insurance important?
Did you know that 2 in 5 Canadians are expected to be diagnosed with cancer in their lifetime? Many of these people will suffer financially as a result of their diagnosis.
The lump sum payment provided by the critical illness insurance policy offers valuable financial protection from being diagnosed and surviving a covered condition. Because there are no restrictions on how you can spend the money, you can focus on recovery without worrying about the financial burden of your illness.
Who should get critical illness insurance?
Critical illness insurance can cover you, your family, and your business. Your ability to earn a living and maintain your health are crucial to the family’s financial stability.
Children and homemakers don’t generate income for their families, but getting coverage will provide financial flexibility if they are diagnosed with a covered critical illness. As a bonus, critical illness insurance products for children have several more covered conditions.
Small business owners will also want to consider a critical illness plan to ensure their companies can meet their financial obligations while they recover from their sickness.
What are the types of illnesses covered by critical illness insurance?
Although the covered conditions depend on the insurance company and its critical illness policy, you will find overlaps among different products. At the minimum, a policy covers life-threatening cancer, heart attack, stroke, and coronary artery bypass surgery.
However, the most comprehensive plans have 25 to 26 critical illnesses covered. They also pay a smaller critical illness benefit for some non-life threatening illnesses. The partial benefit doesn’t reduce the main critical illness benefit.
What types of cancer are covered by critical illness insurance?
According to the policy, cancer means a definite diagnosis of a malignant tumour characterized by the uncontrolled growth and spread of malignant cells and the invasion of tissues.
Therefore, critical illness insurance doesn’t cover all types of cancer. For example, any malignant melanoma skin cancer that is less than or equal to 1.0 mm in thickness is not a covered critical illness (unless it is ulcerated or is accompanied by lymph node or distant metastasis).
Does critical illness insurance cover pre-existing conditions?
Some pre-existing medical conditions may preclude you from purchasing critical illness insurance. For example, you will not be eligible for coverage if you have a history of invasive cancer, major organ transplant, multiple sclerosis, heart attack, or stroke.
If you have a less severe medical condition like high blood pressure, high cholesterol, or a mental disorder, you may still be able to get critical illness insurance.
You’ll have to answer medical questions about your pre-existing condition during the application. Upon review, the insurer may offer you coverage at the standard rate or a higher premium. It may also amend the policy with an exclusion for your pre-existing condition. Ensure you read the policy carefully to understand your coverage completely.
What if you already have critical illness insurance through your group benefits?
If your employer provides group critical illness insurance, you’ll want to ask yourself a few questions:
How much coverage does it provide? Do you need a personal policy as a top-up if it’s not enough?
How much does it cost? Does your employer pay for it, or do you? Does the premium increase over time, or does it stay level?
Will you stay with this company long-term? If not, then the coverage isn’t very reliable.
Do you want your own coverage? One of the benefits of buying personal critical illness insurance is the control you have over the policy. You don’t have to worry about your employer reducing your benefits, and you can keep it no matter where your career takes you.
How do you make a critical illness claim?
Becoming critically ill is stressful, but filing a claim doesn’t have to be. Although you have one year to make a claim, you should do it as soon as you’re diagnosed with a condition covered by the policy.
Upon notifying the insurance provider about the diagnosis, it will send you claim forms to complete. The insurer may require additional medical information to assess the claim, which it may obtain directly from your physician.
If it approves the claim payout, it will send you a cheque for the amount of insurance coverage you bought. If it denies your claim, it will send you a letter explaining why you don’t qualify for benefits.
How Can You Get Critical Illness Insurance?
Most insurance companies don’t sell critical illness insurance products directly to consumers. Instead, you’ll have to get coverage through a licensed insurance agent. Here are a few more essential things to consider before buying a critical illness policy.
How much coverage can you get?
The maximum critical illness insurance coverage depends on the insurance company. Most have an upper limit of $2,500,000, but the average policy people buy is between $100,000 to $250,000.
How much does critical illness insurance cost?
The cost of critical illness insurance varies based on many factors, including your gender, age, health, smoking status and optional riders purchased. Generally, younger and healthier individuals will pay less for critical illness insurance than older or less fit individuals. Women also pay less than men. In addition, policies that have more illnesses covered will be more expensive than those with more limited coverage or benefits.
Do you need to take a medical exam for critical illness insurance?
It depends on your age and the amount of critical illness coverage you buy. A medical exam is usually required if you are over 18 and getting over $250,000 in benefits. The medical exam includes measuring your height and weight and taking blood and urine samples.
Medical exams are a standard part of underwriting, the process in which the insurance company assesses your risk to determine if you are eligible for coverage.
How can you customize your critical illness insurance policy?
Besides the lump sum benefit amount, you can also choose the type of critical illness plan, like term or permanent insurance.
Term insurance policies cost the least initially. The downside of the low upfront cost is the premium increases after the term ends. For example, the cost goes up after 10 years for a term-10 policy. The price may climb so high that you end up cancelling the insurance coverage after 10 years, so you’ll want to choose a longer term if you plan to keep it for more than 10 years.
On the other hand, permanent insurance policies have level premiums for life. While most force you to pay until age 100, some products have shorter pay periods, like 10 or 20 years.
You can also customize your critical illness policy with riders. These optional benefits enhance your coverage for an added cost. For example, you can buy the return of premium rider, which will refund premiums paid if you don’t end up claiming benefits.
Need Critical Illness Insurance?
Critical illness insurance provides financial support during a crisis, helping alleviate the burden of financial obligations during recovery. Along with disability insurance, it forms a safety net around you and your family to protect you from the unexpected.
Understanding how critical illness insurance works is the first step in creating that safety net. Before you buy, you should also understand the definitions of the covered conditions, exclusions, limitations, and more. A licensed insurance advisor can walk you through the steps to find the right critical illness plan.
Contact us today at info@briansoinsurance.com or 604-928-1628, and we let us help you obtain the perfect critical illness insurance policy.
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.
