Critical Illness Insurance Worth It: How to Make an Informed Decision

Critical illness insurance can provide a financial safety net during a medical crisis.

Critical illness insurance pays out a lump sum if you're diagnosed with a covered condition, such as cancer, heart attack, or stroke.

This can help cover medical expenses, lost income, and other financial burdens.

Research shows that 1 in 2 people will be diagnosed with cancer in their lifetime, making critical illness insurance a worthwhile consideration.

The cost of critical illness insurance varies depending on your age, health, and coverage limits.

A typical policy can cost between $50 and $200 per month, but the benefits can be substantial.

Having critical illness insurance can be a lifesaver, literally. Over 80% of critical illness insurance policies are paid out, which means it's very likely you'll receive the lump sum benefit amount if you need it.

A monthly premium for a 10-year, $100,000 policy for a 40-year-old non-smoking male is around $70, or $840 a year. For a 50-year-old male non-smoker, it's around $100 a month, or $1,200 a year.

The lump sum payment you receive through a critical illness policy is tax-free and can be used for anything you want, such as taking time off work, paying the mortgage, or even traveling abroad for treatments not covered by your government health plan.

Critical illness insurance can provide a financial safety net during difficult times, paying out a lump sum benefit that's non-taxable. This payout can be used for treatment, expenses, or other needs, allowing individuals to focus on recovery.

Over 80% of critical illness insurance policies are paid out, making it a worthwhile investment. This high payout rate is due in part to the variety of illnesses covered, including heart attack, stroke, bypass surgery, and cancer.

A 40-year-old non-smoking male can expect to pay around $70 per month for a 10-year, $100,000 policy. This cost is relatively low compared to the potential benefits, which can include tax-free lump sums and reduced debt.

Critical illness insurance can be purchased as a standalone policy or as a rider to an existing life insurance policy. Some policies also offer riders, such as return-of-premium or disability waiver-of-premium, which can provide additional benefits.

Here are some key advantages of critical illness insurance:

By considering critical illness insurance, individuals can create a financial plan that addresses their unique needs and goals.

Critical illness insurance may not be the right fit for everyone, and there are some downsides to consider. It's more expensive than life insurance, which can be a significant drawback for those on a tight budget.

The underwriting process for critical illness insurance is also more stringent than for life insurance. This means you'll need to provide more detailed medical information and undergo a more thorough review.

One of the biggest complaints about critical illness insurance is the strict claims process. You'll need to have an official diagnosis from a doctor, which can take time and may not be covered immediately.

Here are some of the key disadvantages of critical illness insurance:

Critical illness insurance works directly with you, not with healthcare providers. If you're diagnosed with a covered condition, you receive a lump sum payment, usually by check or direct deposit, depending on the plan and your preference.

You don't have to provide receipts or report how you spend your benefit. This means you have complete freedom to use the money as you see fit. For example, you might choose an out-of-network doctor and use your benefit to cover the difference in cost.

Here's a breakdown of how critical illness insurance works:

You can even use the money after you recover. For instance, you might buy a treadmill to get healthier and prevent a second heart attack. Or you could simply deposit it in the bank.

Critical illness insurance is designed to help cover the financial gaps that traditional health insurance often leaves behind. It provides a lump sum payment upon diagnosis of a critical illness, which can be used to cover unexpected expenses.

You might be wondering what exactly is covered under critical illness insurance. In Canada, it covers close to 26 diseases that require immediate medical intervention and management. Some of the most prominent diseases covered include heart attack, stroke, cancers, and aortic surgery.

Here are some of the specific illnesses that critical illness insurance covers:

In some cases, critical illness insurance may also cover other conditions, such as life-threatening cancer, end-stage kidney failure, and major organ transplant.

Critical illness insurance works directly with you, not just healthcare providers. You get a lump sum payment, either by check or direct deposit, depending on your preference.

The payment amount typically equals the amount of coverage you bought, but some plans may pay less for less severe conditions. You don't have to provide receipts or report how you spend your benefit.

You can use the money to cover out-of-network doctor costs, lost wages, rent, and even travel expenses. This is because the cost of treatment doesn't affect how much the policy pays.

You can use the money after you recover, too. For example, you might buy a treadmill to get healthier and prevent a second heart attack.

Here are some common expenses that a critical illness benefit may help with:

You get to decide how to spend the money you receive. You can deposit it in the bank, pay off debt, or cover other expenses related to your illness.

You can often customize your critical illness insurance policy to fit your specific needs. Insurers typically offer various options that allow you to tailor your coverage.

You can select from a range of critical illnesses to include in your policy, such as 25+ illnesses offered by many Canadian providers or basic coverage for 16 or even 4 illnesses offered by a few companies.

To give you a better idea of how to select the best critical illness insurance policy, here's a breakdown of policy benefits you should look for:

You can purchase critical illness insurance even if you have a pre-existing condition, but it may be more challenging.

Insurers often assess the risk associated with your pre-existing condition, which could lead to higher premiums.

This means you may end up paying more for your insurance policy.

Higher premiums are just one possible outcome - insurers might also exclude certain illnesses related to your pre-existing condition.

You can select from a range of critical illnesses to include in your policy, giving you control over what's covered.

Some insurers offer a lump-sum payout amount that you can determine yourself, allowing you to tailor the financial support to your needs.

Optional riders, like the return of premium or disability income, can be added to your policy for additional benefit.

The length of coverage can also be customized, whether it's a set number of years or until a certain age.

You can choose from a variety of premium payment options, such as limited pay, which can reduce the financial impact of premiums.

Here are some options to consider when customizing your policy:

Other supplements to consider are hospital indemnity insurance, which kicks in during a qualifying hospitalization, and accident insurance, which covers injuries such as puncture wounds or broken bones.

Hospital indemnity insurance pays a lump-sum cash amount that you can use as you wish, similar to critical care insurance.

Accident insurance may also pay a lump sum to spend as needed, just like hospital and critical illness coverage.

Short-term disability insurance provides income if you're unable to work for a while, typically replacing part of your income for three to six months.

Some short-term disability insurance plans may pay for up to two years of income replacement.

Long-term disability insurance can replace your income if you become sick or physically unable to work, with benefits lasting a few years and even through retirement, depending on the plan.

Accidental death and dismemberment (AD&D) insurance provides coverage in the event of a death from an accident, and you can also receive benefits if you're still alive but lose a limb, sight, hearing, or speech.

Here are some key differences between short-term and long-term disability insurance: