What is Critical Illness Insurance?

Critical illness insurance offers a lump-sum, tax-free payout if you're diagnosed with a serious illness, typically after a 30-day waiting period. The payout can cover medical bills, medical expenses, childcare, or lifestyle changes. Some policies cover fewer illnesses, while others provide broader protection.

Critical illness insurance is available both as a fully underwritten policy or a guaranteed issue policy. You have to take a medical exam to qualify for a fully underwritten policy. For guaranteed issues, you wouldn't need to take any medical exam, only need to answer a few health-related questions.  

The benefit amount may depend on the severity of your illness. More serious conditions typically qualify for the full benefit, while less serious ones may result in a partial payout. Easily treatable illnesses may not receive any benefit.

What does critical illness insurance cover?

Illnesses covered are typically 4 or 25 (higher price for covering 25 illnesses). The most common covered critical illnesses include:

• Heart conditions
• Cancer
• Stroke

However, many critical illness insurance policies also cover a range of less common conditions, such as:

• Blindness
• Deafness
• Alzheimer’s disease
• Parkinson’s disease
• Cystic fibrosis
• Multiple sclerosis
• Paralysis
• Major head trauma
• Severe burns
• Coma

What doesn’t critical illness insurance cover?

Critical illness insurance doesn’t cover chronic conditions like asthma or diabetes, pre-existing illnesses, or self-inflicted injuries. Alcohol and drug use may also void coverage. Each provider has different exclusions, so review the policy details before signing up.

Who is critical illness insurance for?

A serious illness can bring not only health challenges but also financial strain. While health insurance may cover some costs, living expenses and lost income can still create pressure. Critical illness insurance helps bridge these gaps. Before purchasing, consider the following:

• How likely are you to develop a critical illness in the next 5–10 years?
• Do you have a family history of heart attack, cancer, or stroke?
• What does your health insurance cover, and can you manage out-of-pocket costs?
• Can you maintain your lifestyle if you're unable to work?

Basic plans are affordable but may offer limited coverage, while comprehensive policies provide broader coverage and higher payouts at a higher cost. Additionally, think about your risk of developing severe illness, including factors like age, family history, and lifestyle choices such as smoking or drinking. It may also be helpful to consult with your doctor.

If you are at higher risk for severe illness, buying a critical illness policy may be a smart decision. It may also be the right choice if you cannot deal with the costs of a serious illness on your own if you were to get diagnosed with one. Disability insurance is quite similar to critical illness insurance but, they do have their differences.

How much Critical illness insurance do I need?

Think of a critical illness insurance policy as an umbrella. Its purpose is to keep you safe and dry in a rainy-day scenario. So, you want enough critical illness insurance coverage to offer the kind of financial protection you might need.

Here are some tips to help you estimate how much of a critical illness umbrella you should buy.

• Calculate the income you will have to replace

A common method is to multiply your annual income by three, covering living expenses and debts for three years if illness prevents you from working. Consider how long your children will rely on your income and include college tuition if that’s part of your plan.

• Calculate your expenses

Add up all your monthly expenses, like groceries, medication, and mortgage payments. And then subtract expected income from any other source, like your spouse. Now multiply the monthly expenses by 12, and the resulting figure by the number of years you expect to be away from work because of a severe illness.

• Take into account the expected medical costs

To the amounts computed above, also add the medical expenses that may come your way if you get diagnosed with a critical illness. This includes home care expenses and the cost of home medical equipment you may need for recovery.  

How much does critical illness insurance cost in Canada?

Premiums for covered critical illness insurance are specific to the person applying for coverage. As a result, even two persons of the same age may have to pay widely different rates.

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Your cost of critical illness coverage depends on many factors, such as:

Age

Younger people pay lower premiums than older individuals, as they’re less likely to develop critical illnesses. It’s wise to get coverage early for financial protection. For example, a healthy 30-year-old might pay $25/month for $100,000 in coverage over 20 years, while a 40-year-old pays about $47/month, and a 50-year-old over $105/month.

Health

You are likely to receive favorable rates if you are in good health. On the other hand, medical conditions like high blood pressure and diabetes can bump up your insurance cost.

Family history

Do you have a family history of critical illness? If so, expect to pay more for critical illness coverage.

Smoking

Tobacco use puts a person at a higher risk for cancer, heart attack, and other severe illnesses. It comes as no surprise that smokers pay significantly higher premiums than non-smokers.

Number of covered conditions

The more illnesses covered in your plan, the higher your premium rates. For example, a 45-year-old woman with a cancer-only plan may have to pay closer to $40 a month for $25,000 critical illness benefit. However, she may have to cough up twice as much if organ transplants and other health conditions are also included in the plan.  

Amount of critical illness coverage

Larger payout amounts result in higher premiums. A $500,000 benefit costs more than a $100,000 one. The critical illness benefit is a lump-sum, tax-free payment while the customer is still alive.

Term Length

The longer the policy’s term, the higher the monthly premiums will be. That’s because a longer term makes it more likely that the insurance provider will have to pay the benefit.

Return of premium rider

Riders are additional benefits that allow you to customize your insurance policy to suit your specific needs.

A Return of Premium (ROP) rider refunds premiums under conditions like death, policy expiration, or cancellation. ROPD (Return on Death) is cheaper, while ROPX (Return on Expiry) costs more. Premiums are refunded after a set period, such as 15 or 20 years.

What are the best critical illness insurance companies in Canada?

Critical illness insurance can get complicated. But buying the right kind of coverage from the right life insurance company in Canada doesn’t have to be. Work with a third-party broker, like Dundas Life, to find the best possible coverage at the best price.

Critical illness insurance needs vary for each person, and no single insurer offers a one-size-fits-all solution. However, Dundas Life can help you find the insurer that best fits your needs.

Dundas Life partners with leading insurance companies in Canada. We can help you buy a critical illness life insurance policy from Canada Life, BMO, RBC Insurance, Manulife, and more.

Critical illness products offered in Canada

In Canada, critical illness insurance vary, with some covering only a few conditions and others covering up to 25. Coverage amounts range from $20K to $2 million, and you can choose between temporary or permanent policies. Life insurance providers offer critical illness policies in the following terms:

• 10-Year Term
• 20-Year Term
• Term to Age 65
• Term to Age 100 (Permanent)

Benefits of critical illness insurance

A critical illness can threaten more than your health; it can drain your savings or push you into bankruptcy. Even with health insurance, out-of-pocket costs can strain your finances. A critical illness policy helps you weather a crisis without exhausting your emergency fund and other savings. If diagnosed with a covered illness, the insurer pays a lump sum to use as needed. 

Alternatives to critical illness insurance

Critical illness insurance is a form of supplemental insurance. It can be a good choice for people with specific needs, but may not be suitable for everyone. Some smart alternatives to critical illness worth consideration are:

• No supplemental insurance

Young, healthy individuals with a robust personal health plan can forgo supplemental insurance completely.

• Cancer-only insurance

Cancer is the leading cause of death in Canada, accounting for roughly 218 deaths per 10,000 population. If you are worried about the possible costs associated with cancer treatment, cancer-only insurance may be ideal for you. With that said, remember that it is not designed to replace a traditional health insurance plan. Instead, it fills in those gaps that the latter may not cover.

• Combined policies

Some insurers let you package critical illness with another insurance product, like life insurance. This may be a good option for those who would rather pay one premium instead of paying separately for different policies.

How to get critical illness insurance

Underwriting involves these steps:

Step 1 – Fill in the application

When you apply for critical illness insurance coverage, you must provide information about your medical history. You also need to specify the coverage amount and the policy term (in the case of temporary coverage).

You can fill and submit the insurance form online (if that’s an option). Else, you will need to mail the form back to the insurer after completing it.

Step 2 – Telephone Interview

Someone from the company will call you to review your health and work history.

Step 3 – Basic Medical Checkup

A paramedical examiner will schedule a basic health checkup at your convenience. She will measure your height, weight, and blood pressure and take your urine and blood samples.

Step 4 – Attending Physician’s Statement

If you have certain medical conditions, the insurer may ask your doctor to complete an attending physician’s statement. It lists the conditions you’re being treated for, the medication you’re taking, and your prognosis.

Step 5 – Pay the first premium

Typically, it takes about four to six weeks for the insurer to process the submitted information and send the policy papers to you. Once you pay your first premium, the policy goes into effect.

Is critical illness insurance a good option for you?

Critical illness insurance pays for and covers conditions like cancer, stroke, and heart attack, with some policies including kidney failure, paralysis, or organ transplants.

According to the Canadian Cancer Society, cancer accounts for 30% of all deaths in Canada. Cardiovascular disease, on the other hand, is responsible for nearly 27% of deaths.

Looking at the statistics, the answer is often yes—insurance can help cover expenses related to treating a serious illness.

Speak with an expert at Dundas Life to determine if critical illness insurance should be part of your long-term protection plan.

Common FAQs

How is Critical Illness benefit Paid Out?

Critical illness most commonly pays out as a one-time lump-sum payment. You should receive the money within 8 weeks of submitting a claim.

Does normal health insurance cover critical illness?

Health plans cover hospitalization and medical expenses, but the insurance provides a lump-sum payout for covered conditions, which you can use for medical costs, childcare, or daily living expenses.

What is the survival period in critical illness insurance?

You need to survive a minimum number of days after a diagnosis of a critical illness to receive the payout. This period is known as the survival period. For most critical illness insurance plans, the survival period is 30 days. However, the length of this period can vary from one life assurance company to the next.

Is critical illness insurance taxable?

Depending on who is paying the premiums, the insurance coverage may or may not be tax deductible. Find out if your policy is tax deductible.

Could I make a critical illness insurance claim after I get diagnosed with a covered critical illness and survive the survival period?

Critical illness plans are complex and come with specific stipulations. Coverage depends on meeting certain conditions, like a cancer diagnosis being life-threatening or stroke-related neurological damage lasting over 30 days. Before committing, ensure you understand the terms fully—our expert advisors are here to help.

If I get diagnosed with multiple conditions covered in my policy, will I receive a payout for each one?

In short, the answer is, it depends. The insurer will pay you the insurance benefit in its entirety only once. So that could be through one illness or through partial coverage of multiple critical illnesses.

What is the partial payout in critical illness plans?

Some critical illness insurance policies also cover less severe illnesses. But they pay a partial benefit amount if you get diagnosed with such a condition. Your insurance plan will name the health conditions that are eligible for a partial-benefit payout. The partial payments range between 10% and 25% of your insurance benefit and are usually subject to limits. For example, the maximum payout for each illness may be capped at $50,000.

How can I get critical illness insurance quotes?

Dundas Life partners with leading insurance companies in Canada. These include, among others, Canada Life, BMO Insurance, RBC Insurance, and Sun Life Financial. We’ll provide you with quotes from various insurers so you can pick the one that offers you the best deal. All you have to do is speak to one of our insurance advisors and share your insurance needs.