What is Critical Illness Insurance?

Critical illness insurance basics

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

1. 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.
2. 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.
3. Paid regardless of ability to work – Unlike disability insurance, the payment is not linked to your inability to return to work.
4. 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.