Critical Illness Insurance

What is Critical Illness Insurance?

Critical illness coverage is a type of health insurance that provides a lump-sum payment should you become seriously ill, whereas a life insurance policy pays a lump-sum amount to your designated beneficiary upon death. Different again is disability insurance which is designed to replace a portion of your monthly income should a disability prevent you from performing the normal duties of your work.

Once a claim has been paid out you are free to spend the money in any way that suits you best. It could be used to help recover lost income, pay for private nursing or out of country treatment, medical equipment, or even pay off your mortgage.

By reducing your financial burden it can help you to maintain your independence and allow you to focus all your energy on the healing and recovery process.

Originally there were four main conditions covered by critical insurance policies which included heart attack, cancer, stroke and coronary by-pass surgery. Today the list has been extended to include organ failure, transplants, paralysis and other conditions like Alzheimer’s disease.

Coverage may vary from one insurer to the next so make sure to read your policy carefully and consult with your advisor regarding the details. Typically the illnesses and diseases covered by a critical insurance policy include:

  • cancer
  • heart attack
  • stroke
  • blindness
  • Alzheimer’s
  • multiple sclerosis
  • organ transplants
  • kidney failure
  • paralysis

Before a pay-out is triggered the insurance company will usually have a waiting period of about 28 days to determine whether the illness is terminal or survivable. With improvements in medical technology however, the probability of living a full life after diagnosis is ever increasing.

Coverage may vary according to the degree of severity of, or conditions associated with, a particular illness or disease. For example, if you are diagnosed with a type of cancer that is treatable and that results in minimal “down time”, you may not be eligible to make a claim.

Policies for critical illness can either pay out every month, or every year, but more often they are a lump sum. If the former option is chosen then it could potentially work as an income replacement policy, although this is no reason to ignore an ordinary income protection plan which can pay out over simple illnesses and short times off work.

A critical illness can happen to anyone at anytime:

  • It is estimated there are over 70,000 heart attacks in Canada each year.
  • There are between 40,000 and 50,000 strokes in Canada each year.
  • An estimated 3,075 Canadians will be diagnosed with cancer every week.

Because these types of illness can strike at any age, it is important to consider the benefits of coverage while you are still young and in good health, as coverage cannot be purchased for a pre-existing condition, chronic, or terminal illness.

A critical insurance policy can be beneficial for peace of mind knowing that you and your family’s finances are protected against unforeseen circumstances.

Our critical illness insurance calculator can illustrate how critical illness insurance could help you if you were diagnosed with a critical illness.

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