What is critical illness insurance?
It is a simple insurance product that gives you a lump sum of money if you are diagnosed
with one of a list of serious medical conditions – most commonly cancer, heart attack, or
It sounds like just another way to get my insurance money. Isn’t life insurance enough?
How many people do you know who died before age 50, 60? Now, think about the people
you know who had cancer or a heart attack, and survived, at least for a while. Life
insurance doesn’t pay out unless you die. So, this is insurance for when you have a serious
condition, but don’t die.
But everyone talks about life insurance like you have to have it. Why not this illness insurance
thing? Is it new?
Yes, critical illness insurance was created by a doctor in the 1980s. Life insurance has been
around for hundreds of years. In the past, if people got sick they often just died. Life
insurance made the most sense.
But medicine is much better now. We live longer, we are healthier. Now, young people are
more likely to live than to die. But if I die that’s a huge loss to my family.
Absolutely. It’s a tragedy in so many ways. But you know what the truth is – living is usually
more expensive than dying.
Either way there’s still a mortgage, bills to pay, children to educate, etc. If you die, you need
a funeral, some money for probate and estate costs, maybe for taxes.
However, if you have a serious condition and live, you might need expensive treatments
you can’t get in Alberta, to renovate your house, to pay for extra help if you are seriously
disabled. Or you might just want to use your last months or years to travel, give gifts to
your loved ones, and just enjoy yourself. There’s no fun to buy if you are dead.
Can I get this coverage for my kids?
Yes, if they are between 0 to 25 years old you can get them a child critical illness policy.
After that, they get an adult policy, but you can pay for it if you’re nice like that.
I only have so much money to go around. I can’t afford any more.
Okay, I get that. And what is the better option is to spread that money around. Think of how betting works:
The more likely something is going to happen, the more likely you will win some money
back. By just buying life insurance you are betting against yourself and your family. You are
saying, here, insurance company – take this money for this scenario that isn’t very likely to
happen. But I’m not interested in betting on the more likely cases of illness or disability.
Does that make any sense? My opinion is you should spread your money around and cover
all your bases. Yes, you will have less of a payout if anything should happen, but it’s better
than zero payout if the most common things happen, and you have no insurance.
You keep talking about children. I don’t have anyone who relies on my money.
Umm, I think that would be you. If you don’t have anyone else who could support you, then
what are you going to do if you got sick? Move back into your parents’ basement? If you are
independently wealthy or have lots of back-up plans, that’s great – do you want to write a
post for my website?
I’m too young and healthy to need insurance, right?
When you are young and healthy is the perfect time to apply for several reasons:
• You will get a cheaper policy.
• You don’t have to worry about becoming uninsurable if something happens to you.
• The healthier you are, the more likely you are to survive, and need critical illness
insurance, rather than life insurance
What does it cover?
Each company will have a list of illnesses that are covered, from around 4 to 30. Here are
some of the common conditions that are usually covered:
• Alzheimer’s Disease
• Benign Brain Tumor
• Heart Attack
• Heart Valve Replacement
• Lou Gehrig’s Disease (ALS)
• Loss of Independence
• Loss of Speech
• Major Organ Failure
• Major Organ Transplant
• Motor Neuron Disease
• Multiple Sclerosis
• Occupational HIV Infection
• Parkinson’s Disease
• Severe Burns
The majority of the claims are for cancer, heart attack, and stroke.
What doesn’t it cover?
- Early stage and most non-malignant cancers, either aren’t covered, or have a much smaller
payout. Minor conditions aren’t covered.
- Diabetes isn’t covered except Type 1 in a specific company’s child policy.
Anything not specifically listed in the policy isn’t covered.
If you die within 30 days of diagnosis the policy will not pay out.
- Usually if you get diagnosed with cancer within the first 90 days you will not be paid. (Policy
may or may not be cancelled.)
What can you use the money for?
The great thing is that you can use it for anything. Here are some possible uses for your
• Child care costs
• Home cleaners
• Meal services
• Hospital parking
• Entertainment while you recover
• Debt payment
• Regular bills
• Replace your spouse’s income
• Fly in friends or relatives to help out
But what if I’m not healthy?
There are companies that specialize in helping people who aren’t perfectly healthy. You
may not be able to get lifetime coverage, but you can get some critical illness insurance at
least during your working years.
Are there different types?
Yes, there are differences between the different companies. You should think about what
features are most important to you. And your broker should be able to help you make a
final decision. Here are options you may see:
• Return of premiums, if cancelled, or if you die before making a claim.
• Second payout for a different category of problem.
• Number of illnesses that are covered.
• Cancer reoccurrence coverage.
• Partial payments for early stage cancers.
• Automatic increases to coverage.
• Premiums guaranteed to not increase.
• Amount of underwriting required/ease of application process.
• Cancer within 90 days cancels the policy.
• Lifetime coverage or only to a specific age.
What’s the difference between this and disability insurance?
Critical illness is straightforward and has a lot less rules. When you sign up, they don’t care
if you are working, what your income is, or assets are. But the payout is limited to what you
paid for. Once you have used the money that is that. (Except for policies that pay out twice,
but you won’t necessarily get that money ever.)
For disability, it’s related to your income, expenses, or debt, and your ability to work. At
sign-up they care if you are working and how much you earn.
At claim time they care about whether you can work or not and if your income has
decreased or not. But, depending on your policy, you may get ongoing coverage as long as
you can’t work.
They both fulfill different needs, and I recommend considering whether both are needed in
What’s the difference between this and long-term care insurance?
Most critical illness policies will pay out if you aren’t able to live independently. But the
money is limited. For long-term care, the payments continue up to the time limit you picked
and as long as you need the coverage.
Also, be aware that long-term care insurance is being discontinued by some insurers, so
critical illness insurance may be one of the ways to get this coverage.
I’m going to get all the government benefits, so why would I need this?
You put a lot of faith in the government. Hey, I’m not a government-hater. I think they give
us lots of good stuff, but I’m also practical. Let’s go over the various government options:
• CPP Disability – is hard to get. You have to have a severe and long term illness to
qualify. The average payment is also only about $1,000 per month.
• EI Sickness Benefit – only lasts for 15 weeks and is only if you can’t work. It only pays
55% of your pre-disability income to a maximum of $547 per week.
• Worker’s compensation – only takes affect if you got injured at work, which is very
unlikely with an illness.
• AISH (Assured Income for the Severely Handicapped)– is only for disabilities that are
likely to remain permanent, and also are the main reason you can’t work. Plus they
look at other income, assets etc.
• Provincial Assistance – maybe a little bit of help in some circumstances
• All of these options have hoops to jump through and there is no guarantee you will
actually get money. Plus, for most people the amount they pay will not cover all your
If you want to talk more about your particular situation, please book an appointment. I’m licensed in Alberta only right now, so you must be a resident to purchase from me. However, we can do everything over the phone/Skype.