Critical Illness Insurance in Canada: Is it Worth the Cost?
How critical illness insurance works
Critical illness (CI) insurance offers a lump-sum payment while you’re alive if you are diagnosed with a covered critical illness. This type of coverage is designed to be a financial buffer, giving you quick access to cash if you’re experiencing serious health issues.
Critical illness insurance can be either term coverage for a set period or permanent coverage for life.
You may be asked questions about hereditary conditions or past illnesses in your application. Like other forms of insurance, you must pay a monthly premium to keep your policy active, but you’re free to spend the money as needed,
What’s typically covered? Cancer, heart attack, stroke are commonly covered. You must meet your policy’s definition of a “serious condition” and only listed conditions are covered. You may also have to survive a set waiting period after diagnosis (usually 30 days). CI insurance does not cover pre-existing conditions.
What about the money? You receive a payout according to your policy and you can spend it on anything you need, including medical costs, travel, childcare, income replacement, and more. You don’t have to report back on how you spend the money.
When critical illness insurance is worth it
Critical illness insurance coverage tends to be worth it if you and your loved ones would face immediate financial pressure with a serious diagnosis. For example:
- Losing income would cause financial strain
- Dependents are relying on your paycheque
- You don’t have a strong emergency fund
- Your family has a medical history of major illness
- You have limited or no disability insurance
Ask yourself: if you were unable to work for months due to illness, could you still support yourself or your family out of pocket?
No one plans to become seriously ill, but 2 in 5 Canadians will experience cancer and over 10% of hospitalizations in Canada are due to heart conditions, stroke, and vascular disorders.
When critical illness insurance may not be worth it
Critical illness insurance is not for everyone. You probably don’t need CI coverage if:
If you don’t yet have a financial safety net, your money may be better directed toward building an emergency fund or paying down debt. Once your finances are more stable and you can comfortably manage a monthly premium, you can revisit critical illness insurance.
What critical illness insurance typically covers
A typical critical illness insurance policy in Canada will cover around 20 serious conditions, such as stroke, cancer, organ failure, paralysis, loss of limb, multiple sclerosis, severe neurological conditions (ALS, advanced Parkinson’s), and heart attacks.
Read your policy carefully; each insurance provider covers different illnesses and has different qualifiers and exclusions.
These insurance companies cover the most critical illness conditions in Canada:
- PolicyMe: 44 conditions
- Sun Life: 34 conditions
- RBC: 32 conditions
- Manulife: 31 conditions
- BMO: 29 conditions
On the other end of the spectrum, you can find very basic critical illness insurance products that only cover about five illnesses.
Be aware that some plans offer enhanced cancer or cardiovascular coverage. Some also offer a partial payout for “early-diagnosis” conditions—illnesses where full recovery is likely if it’s caught at an early stage.
How much does critical illness insurance cost?
The cost of critical illness insurance in Canada is between $25 and $100 per month for $25,000 and $100,000 in coverage. Prices vary depending on age, sex, health, and the provider:
- Age: Younger people pay less than older people for CI insurance because they’re less likely to suffer from a serious illness.
- Sex: Men and women are vulnerable to different illnesses at different ages, which is reflected in premium costs.
- Health: Being a smoker, having high BMI, alcohol use, and a history of illness all raise your risk of becoming ill, which means you’ll pay higher premiums. You must disclose any history of family illness and past diagnoses to get accurate underwriting.
- Provider/policy: You’ll pay more if you want a larger payout or prefer a longer term length. You’ll pay less for a shorter policy that covers fewer illnesses. If you choose to bundle with another type of insurance, like term life insurance, you might get a discount on both policies.
Even plans with similar coverage at different insurers could come with significantly different monthly premiums. Shop around with at least three companies to find a good rate.
Critical illness insurance vs. disability insurance
Both critical illness insurance and disability insurance offer financial protection if your health suddenly changes, but the payout structure differs.
Some conditions may be covered under both insurance plans. For example, critical illness insurance would pay a lump-sum benefit that you could use to cover medical bills, home modifications, or short-term income replacement while you recover. Disability insurance would replace your income while you’re unable to work up to a certain percentage of your salary.
Critical illness insurance vs. life insurance
Both critical illness insurance and life insurance offer financial protection and are structured similarly; however, the intended recipient, amount of coverage, and the time of payout differ.
Critical illness is about immediate financial support if you become ill — perfect if you don’t have a big emergency fund. Life insurance is about long-term stability for the loved ones you leave behind when you pass who relied on your income.
In other words, CI pays you while you’re alive and dealing with a covered illness whereas life insurance pays your beneficiaries after your death. Both can work together to provide a complete safety net, but you should start with the one that addresses your most pressing financial concerns.
Is critical illness insurance worth it for families?
Critical illness insurance can provide guaranteed financial security in a moment of crisis.
If you and your family would struggle with unexpected medical costs, lost income, and lifestyle adjustments if you got diagnosed with a serious condition, then you should consider CI insurance to ensure financial stability in the face of illness.
FAQ: Is critical illness insurance worth it?
Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors.
Bonnie Stinson is an insurance writer and researcher in Toronto with a decade of experience producing helpful, accurate content for Canadians. They have published resources for some of Canada's most innovative and consumer-trusted companies in the health, legal, and fintech sectors.