Critical illness insurance provides a cash payment if you are diagnosed with a major illness. This money can help pay for extra expenses during your recovery.
Critical illness insurance can protect you financially if you suffer a serious illness. It provides a tax-free cash payment upon diagnosis of a serious medical condition.
4 key features
Covers major illnesses – Policies generally cover illnesses such as cancer, heart attack, coronary artery bypass surgery, stroke, blindness, deafness, paralysis, kidney failure and multiple sclerosis.
Short waiting period – You must survive your illness after diagnosis for a short time period – typically about 15 to 30 days – to receive the payment.
Paid regardless of ability to work – Unlike disability insurance, the payment is not linked to your inability to return to work.
Use the money for any purpose – The payment is made in a tax-free lump sum, and you can use the money any way you want.
Survival rates increasing
With improvements in medical treatments, people are recovering from serious illnesses – such as heart attacks, strokes and cancer – that would have been fatal in the past.
For example, according to the Canadian Cancer Society, in the 1940s, only about 25% of people diagnosed with cancer survived. Today, the survival rate is over 60% and higher still for many common cancers, such as thyroid cancer with a survival rate of over 90%.
While the survival statistics are encouraging, a serious illness can still lead to significant additional costs that aren’t covered by our universal healthcare system or employer health plans.
Potential costs of a major illness
Replacing your lost income
Moving to a new home or renovating your existing home
Having a spouse take time off work
Seeking medical treatment outside Canada
Hiring a nurse or other caregiver
A living benefit
Critical illness insurance is called a “living benefit” because unlike life insurance, the payout goes to you, the policyholder, rather than a beneficiary. So you decide how the cash can best be used – whether it’s to cover additional costs or provide an extra perk after or during recovery, such as a vacation.
Factor in the cost of recovery: More people are surviving and recovering from serious illnesses – but there can be many additional costs that aren’t covered by our universal healthcare system or employer health plans.
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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