Female, 45 years old, non-smoker, no serious health pre-conditions, coverage amount $500,000, Term 10 Critical Illness Insurance
Male, 35 years old, non-smoker, no serious health pre-conditions, coverage amount $250,000, Term 15 Critical Illness Insurance
Female, 32 years old, non-smoker, no serious health pre-conditions, coverage amount $250,000, Term 25 Critical Illness Insurance
Lorne Marr from LSM Insurance shares his experience:
“Critical Illness Insurance provides coverage in the event that you develop a critical illness like cancer, stroke, heart disease. This type of coverage pays a lump sum on a tax-free basis and it comes with a variety of coverage levels in terms of getting $100,000, $200,000, $500,000. The higher the amount of critical illness [coverage], obviously, the higher is the amount of your premiums and you can have a term policy critical illness where the rates start off lower or permanent policy where your rates start off higher but then they are level for life. Some critical illness policies even offer return of premium, so if you stay healthy, you get back all your premium which is a nice feature for a lot of people but it can add a lot to your initial premium.”
Critical illness insurance is a special type of policy that pays you a lump sum should you be diagnosed with particular illnesses. It is up to you to decide how you will spend this lump sum – for your medical treatment or simply at your discretion. Critical illness insurance is not the same as disability insurance, which provides regular monthly payments.
Critical illness cases are clearly defined in an insurance policy and can include just heart attack, cancer and stoke, or 25+ illnesses.
Critical illness is an insurance product that allows you to personally decide what level of coverage you need. Some of the cases when people choose critical illnesses insurance include:
Here is a brief comparison how critical illness insurance compares to disability insurance.
| Critical Illness Insurance | Disability Insurance | |
|---|---|---|
| Purpose | Lump sum that can be used in any way the beneficiary wants | Covers part of the beneficiary’s lost income due to a disability |
| Coverage Payout | One time lump sum | Regular monthly payments |
| Stackable | Yes | No |
There are two main types of critical illness insurance: standard (or medically underwritten) and no medical. Medically underwritten critical illness is the best choice for people in good health, and no medical critical illness is often chosen by people with medical issues.
No medical critical illness insurance has two sub-categories: simplified – for people with some medical issues, and guaranteed issue – for people with serious or many health issues.
Here is a summary of the key aspects for each critical illness insurance type:
| Standard / Medically Underwritten Critical Illness Insurance | No Medical, Simplified Issue Critical Illness Insurance | No Medical, Guaranteed Issue Critical Illness Insurance | |
| Medical tests | Yes | No | No |
| Long questionnaire | Yes | No | No |
| Short questionnaire | No | Yes | No |
| Coverage | Highest | Medium | Low |
| Costs for the same amount of coverage | Lowest | Medium | Highest |
Further below you will find sample monthly rates for each insurance type (as of June 2021)
Critical illness insurance rates are determined through numerous aspects, such as:
In general, critical illness insurance costs are higher than term life insurance costs.
Given that there are different critical illness types as mentioned above, critical illness insurance rates vary. It is also important to mention that each insurance type comes with its own number of medical questions (except for guaranteed issue, which has no questionnaire) and number of illnesses covered. Here is a comparison of rates from sample companies.
| Standard / Medically Underwritten Critical Illness Insurance | No Medical, Simplified Issue Critical Illness Insurance | No Medical, Guaranteed Issue Critical Illness Insurance | |
| Number of medical questions asked | 52 | 16 | none |
| Illnesses covered | 25 | 16 | 23 |
| Female, age 25, non-smoker, coverage of $50,000 | $30.96 | $31.23 | $40.80 |
| Female, age 55, non-smoker, coverage of $50,000 | $96.35 | $89.55 | $156.60 |
| Male, age 25, non-smoker, coverage of $50,000 | $33.62 | $33.66 | $40.80 |
| Female, age 55, non-smoker, coverage of $50,000 | $133.88 | $135.45 | $156.60 |
Source: Medically underwritten Critical Illness Insurance rates are from Canada Life, Simplified Issue Critical illness insurance rates are from Assumption Life, and Guaranteed Issue Critical Illness Insurance rates are from Edge Benefits.
Sadly, critical illness can affect any one of us, no matter what age or gender. It usually strikes when we expect it at the least, and it unfortunately does happen to many. Canadians are more likely to experience a critical illness than they are to die before the age of 75. Here is a breakdown on leading causes for critical illness insurance claims:
70% – Cancer
14% – Heart attack
5% – Stroke
5% – Other
4% – Coronary artery bypass surgery
2% – Multiple sclerosis
Here are three little known Critical Illness Insurance loopholes that you must be aware of.
1. Guaranteed renewable policies versus non-cancelable coverage. There is an increasing number of Critical Illness providers in Canada who offer guaranteed renewable Critical Illness coverage. These policies differ from non-cancelable policies in that the premiums may be adjusted on a class line basis. Non-cancelable policies offer guaranteed premiums for the life of the policy.
2. Many Critical Illness policies carry exclusions for past medical conditions. For example, if the insured has hearing issues, there may be an exclusion on a loss of hearing payout.
3. Be careful not to use Critical Illness coverage instead of Disability Insurance. Both Disability and Critical Illness insurance coverage separate needs and many disabilities, such as back or knee related injuries, which would be covered under a traditional disability insurance policy would not be covered under a Critical Illness plan.
