Critical illness insurance pays you a tax-free cash lump sum if you are diagnosed with a major illness or health condition (such as cancer, heart attack or stroke).
It’s More Common than You Think
One in three Canadians will be diagnosed with a serious, life altering illness in their lifetime. However, because of significant improvements to health care, Canadians are more likely to survive a serious illness than die from it. For many, the burden of extra medical costs associated with surviving serious illnesses can be stressful. A proper financial plan includes considering how you would cope financially if you or a family member became seriously ill.
Unexpected additional costs to surviving a serious illness can include:
- lost or reduced income,
- lost or reduced spousal income if they are helping to take care of you,
- specialized caregiver costs,
- the costs of modifying or purchasing new vehicles,
- renovations to your home,
- the costs of travel to another province or country for treatment,
- and the purchase of medical equipment to support your needs.
Key Features of Critical Illness Insurance Policies
There is a waiting period on the policy (a time period you need to survive following the initial diagnosis) that must pass before it will pay out. The waiting period is usually 30 days. Depending on the type of critical illness insurance you purchase, your policy may cover up to 28 different illnesses, including serious heart conditions, cancer, stroke, blindness, deafness, paralysis and others. There are no conditions on how you use the payment. Once the lump sum has been made to you, you are free to use it as best suits you and your family. The cash you receive is tax-free.
Optional Return of Premium
With Return of Premium, you’ll receive your money back if you don’t require the payout. You decide if you want the premiums to be returned after a certain time period, or returned to your estate after you pass away. With this feature, critical illness insurance won’t cost you a penny! You pay an additional cost to add Return of Premium (that you get back), but it is well worth it for the peace of mind it provides.
Critical Illness Insurance Isn’t Disability Insurance
Critical illness insurance and disability insurance both pay you if you become ill, but they define illness differently. Disability insurance is paid out if you are unable to do your job due to your illness. In contrast, critical illness insurance is paid if you are diagnosed with a serious illness — even if you are able to return to work following your diagnosis.
Also, disability insurance pays you a monthly amount while you are ill instead of a lump sum. The monthly amount you receive from disability insurance could be taxable. Finally, to apply for disability insurance, you need to have a job (because its intended to replace your income). Critical illness insurance is a suitable option for people who don’t have a paying job, such as retired people and stay-at-home parents.
Talk to us, we can help determine the best insurance for your situation.