Critical Illness Insurance
July 11, 2017

What You Need to Know About Critical Illness Insurance

Critical Illness Insurance seems to be everywhere these days.  Your bank is probably calling to offer you coverage (I know ours is), you've likely seen ads or references in the news, maybe your neighbour mentioned their new policy.  But what exactly does it cover and why would you need it?  And how is it different from coverage you may already have?

Critical Illness: The Statistics

To understand why Critical Illness Insurance (CI) is getting so much attention, let's start with a look at the numbers:

50% of heart attack victims are under the age of 65 (heartandstroke.ca)
One in three Canadians will develop life threatening cancer (cancer.ca)
40,000 to 50,000 Canadians suffer a stroke each year (heartandstroke.ca)

The good news is that survival rates from critical illnesses continue to improve because of medical advances.  Unfortunately, the time and expense necessary for recovery can still create financial concerns for you and your family.  Provincial plans and even standard healthcare benefits simply don't take care of all of the costs related to a major illness.

Do I Need Critical Illness Insurance?

CI helps with the financial strain that can be caused by dealing with a serious illness. What would you do if you needed to cover additional childcare expenses while you are receiving medical treatment?  How would you pay for an entry ramp or widened doorways if your mobility restricts you to a wheelchair?  It's important to consider other benefits covering you, such as life insurance, long-term disability, or healthcare benefits.  However these plans usually don't cover day-to-day living expenses, home care, child care, or the costs of traveling to treatment.

CI is a "Living Benefit"

A CI policy pays out to cover expenses incurred when you survive a major illness.  Typically payment from a CI policy requires survival for a period of 30 or 90 days after the diagnosis of a listed condition.  The insurance payment is tax-free, and can be used for any expenses at the patient's discretion.  This means you can decide how best to spend the benefit, to offset the cost of living expenses, travel, home modifications, or other cash needs at the time.

Although policy terms vary, typically a CI plan covers dozens of the most common life threatening conditions including:

  • Alzheimer’s Disease
  • Life Threatening Cancer
  • Coronary Artery Bypass Surgery
  • Heart Attack
  • Multiple Sclerosis
  • Stroke
  • etc.

How Does CI Compare to Other Policies?

Unlike Long-Term Disability (LTD), the payout from a CI benefit is based on survival for a specific duration after a serious diagnosis, not whether your condition is disabling over a period of time.  Whereas LTD benefits are intended to replace part of your on-going income if you're unable to work due to an illness or injury, a CI benefit is not limited in this way.  In fact, CI coverage is available for dependents including children, not just for working adults.  While income from other sources like CPP or WSIB will reduce an LTD benefit, CI does not have these kinds of offsets.  

Because a CI benefit is not based on continuing impairment, it also differs from Long Term Care insurance (LTC).  LTC policies are intended to help pay for nursing home or in-home care expenses, and these benefits are most commonly paid out for seniors who require assistance with daily living activities. The payment from a CI policy is not limited to specific kinds of expenses but instead can be spent according to your needs.

Be aware that CI, LTD, and LTC benefits are not mutually exclusive.  They are designed to protect against different risks and provide for different needs.  For example an individual who suffers a stroke may recover, receive a CI payment from their policy, and be off work for an extended period of rehabilitation during which their LTD policy would help to replace lost income.

CI can be included in a group benefits plan at a very reasonable cost to cover all full time employees.  Many insurers offer a guaranteed level of coverage for a group of employees with no medical questionnaires.  Individual CI policies are also available.  To find out more about Critical Illness Insurance, contact Beagle Benefits.