term life insurance policy document

What is Critical Illness Insurance, and How Does it Work?


In recent years, we have seen more online fundraisers or go-fund-me campaigns for those struggling with medical and health issues to provide financial support to pay for bills during a difficult time in their life. No matter how hard we try, the future is unknown. Life is unpredictable. Critical illness insurance can provide valuable support should you or a family member experience a severe illness.

What is critical illness insurance?

Critical illness insurance will provide the policyholder with a tax-free, lump-sum benefit if diagnosed with a critical illness.  Typically, insurance companies cover 24-26 different cancer, heart attack, stroke, blindness, multiple sclerosis, and more.

Why should you get critical illness insurance?

Life insurance provides long-term financial support for your loved ones should you pass away, while critical illness insurance is intended for you or your family to use. Simply put, critical illness insurance gives your or your loved ones a financial cushion should you contract a severe illness or undergo a serious medical incident. At the same time, you are still alive and hopefully recovering.

Critical illnesses in Canada are widespread. In 2019 there are over 220,000 cancer diagnoses in Canada with a 63% five-year survival rate.  While survival rates for critical illnesses like these (or others like heart attacks) are increasing, the recovery is still daunting and requires a change in lifestyle and day-to-day needs. Financial constraints sometimes force people to return to work sooner and may contribute to the recurrence of the illness.

What does critical illness insurance cover?

Once diagnosed with an illness, there is a waiting period of typically 30 days before a tax-free cheque arrives payable to you to help manage costs. The lump-sum payment can be used in any way you choose; there are no limitations or stipulations. Here are some common expenses covered with critical illness insurance.

  • Maintaining payments for your mortgage, monthly expenses, and other debts
  • Lost income for you or for a family member who takes an extended leave from work to provide care
  • Travel to treatment centres
  • Medications you aren’t covered for
  • Unexpected day-to-day household expenses during recovery
  • A family vacation or experiences

You can also receive a partial benefit for a non-life-threatening illness, and some policies even provide a monthly care benefit if you were to need long-term care.

Critical illness insurance makes sense for business owners.

Running a business takes a lot of hard work and comes with both risks and benefits. Without proper protection, all the time and money spent building your company could be at risk. If you have a severe illness, a corporately owned critical illness policy helps ensure your business will continue to operate, allowing you to focus on your recovery. It can help cover costs like business loans, everyday expenses, and hiring staff or interim replacements while you recover.

How much does critical illness insurance cost in Canada?

People sometimes overlook this coverage believing it to be expensive, but premiums may be more affordable than you may think. The annual premium cost depends on several factors, including your age and general health, the number of critical illnesses included in the policy, and the length of term – typically 10 or 20 years, or up to a specified age. The most common amount of critical illness coverage purchased is $100,000.

  • A 40-year-old non-smoker buying a 10-year policy worth $100,000 will generally cost about $50 per month.
  • A 25-year-old buying a $50,000 policy could cost as little as $17 per month.
  • As with any health, life, or disability insurance product, the older you buy it, the more expensive it becomes.

You never know what life may throw at you next, which is why it’s vital to protect yourself with critical illness insurance. To speak with our Managing Advisor for Life Insurance, Christina Wyatt, visit our Life Insurance page and request a quote today! You’ll worry less about finances and be able to concentrate on what matters most – your recovery.