Critical illness insurance pays a lump sum if you’re diagnosed with a condition that meets the policy’s definition and other claim conditions. We reviewed the Financial Consumer Agency of Canada’s health-insurance guide, CLHIA’s 2024 critical-illness benchmark definitions, CLHIA’s explanation of the voluntary benchmarks and the federal disability-insurance guide.
This guide explains qualifying illnesses, survival periods and the benchmarks’ voluntary nature, then walks through ways to determine the right benefit and compare critical illness insurance with disability insurance or savings.
Before you buy critical illness insurance, make sure you understand medical definitions, survival periods, exclusions, and renewability.
Is Critical Illness Insurance Worth It?
Critical illness insurance makes sense if a covered diagnosis would create a big, one-time financial shortfall and you can afford the premiums once you’ve covered necessities, built an emergency fund, and purchased income protection.
Critical illness insurance may not make sense if your savings and workplace benefits would cover the shortfall, or if the policy does not define the illnesses that concern you in a way that meets your needs.
Don’t make this decision based on family history stats or condition name lists. Make this decision based on the dollars you’d be protecting and policy contractual language.
Calculate The Lump Sum You Would Actually Need
Use this worksheet: target benefit = income shortfall during recovery + uninsured care, travel, debt and home-change costs − available savings − existing critical-illness benefits.
Continue this approach until you arrive at a dollar amount. For example, the income gap may be $3,000 per month for six months ($18,000), travel and caregiver costs may total $12,000, and home modifications may cost $10,000. Savings and group benefits would offset these costs by $15,000, so the gap you need to fill is $25,000.
Remember that this is just a planning example, and you need to plug in your own figures. Be sure to keep an emergency fund for expenses not covered by an insurance policy.
Critical Illness Vs Other Ways To Cover The Gap
| Resource | What triggers access | Best use | Main limitation |
|---|---|---|---|
| Critical illness insurance | Access requires a defined covered condition and compliance with the contract. | Best suited to a known, one-time financial gap. | No benefit is paid for an illness outside the policy definition. |
| Disability insurance | Access requires a covered disability meeting the policy’s work definition. | Best suited to replacing part of ongoing income. | The waiting period, benefit period and work definition apply. |
| Emergency savings | You decide when to use it. | Best suited to immediate, flexible costs. | Access is limited to the amount saved. |
| Life insurance | Access follows the insured’s death while coverage remains in force. | Best suited to financial needs after death. | It does not normally fund the insured person’s recovery. |
| Employer benefits | Access follows the group plan’s terms. | It may reduce the amount you need personally. | Coverage and portability depend on the plan. |
Read More: Compare Life Insurance and Health Insurance in Canada
What Does Critical Illness Insurance Cover?
Critical illness policies do not cover every type of cancer, heart problem, neurological disorder, or loss of function. They cover conditions listed in the policy. The CLHIA provides benchmark definitions for 26 illnesses, and although insurers may use these definitions, they are not required to, and they may use different lists of illnesses and contract wording.
For example, as of 2024, the CLHIA benchmark definition of blindness refers to a complete and irreversible loss of sight in both eyes and diagnosis according to specific criteria. Loss of vision (even permanently) in one eye wouldn’t be covered. Ask for a copy of a specimen contract before buying critical illness insurance, and compare policies based on the full definitions of illnesses that matter to you rather than the total number of illnesses listed on the cover. For more information, review the policy terms.
Read More: See How Some Life Insurance Benefits Can Be Used While Alive
Limitations And Exclusions In Critical Illness Insurance
| Contract term | What it means | What to check |
|---|---|---|
| Survival period | You must remain alive for the stated period after the qualifying event before the full benefit is payable. | Check its length, starting point and what happens if death occurs during it. |
| Post-issue exclusion or qualification period | A named condition or related signs may be excluded during an early policy period. | Check which conditions, symptoms, tests and notice duties are included. |
| Condition definition | Coverage requires the stated medical and severity test. | Check the required specialist, tests, measurements and permanence. |
| Partial benefit | A listed early or less severe event may receive a smaller payment. | Check the amount, frequency and effect on the main benefit. |
| General or individual exclusion | This is a circumstance or condition the contract does not cover. | Check policy-wide exclusions and any exclusion added for your history. |
Survival Periods are different from the exclusion periods described above. CLHIA’s voluntary guidelines suggest a benchmark of 30 days unless otherwise indicated in the definition for a specific condition. However, you should read your insurer’s policy, as they can deviate from CLHIA’s voluntary guidelines. Your contract with your insurer counts.
Each insurer’s policy defines the covered illnesses in detail. Some may even require that your condition meet certain severity requirements.
Partial Benefits For Some Conditions
Coronary angioplasty is a procedure that opens up or widens blocked arteries. Some policies may treat it as a condition that qualifies for a partial benefit. Review your policy to learn which illnesses may be covered and the maximum percentage of the coverage amount payable.
Some health and critical illness insurance policies provide partial payouts for lesser illnesses. Know whether a partial payout leaves your policy’s remaining benefits intact. Your contract should specify whether receiving a payout affects your ability to receive later benefits.
Should I Get Critical Illness Insurance?
Estimate the out-of-pocket costs you would face during a critical illness and whether your partner could continue providing income.
- Are there other sources of income, savings, disability coverage, or paid time off to cover lost wages during a critical illness?
- Do you already have group critical illness coverage offered by your employer?
- Can you comfortably maintain the cost of critical illness insurance payments throughout the term/renewal dates without sacrificing other more pressing insurance needs?
- Are the definitions of critical illnesses included in the policy and its terms easily understood?
- Does family history affect your concern? Though an important consideration, a strong family history alone should not be the basis for buying critical illness insurance because it doesn’t prove the policy will pay for that condition or offer good value.
Read More: See How Accident Insurance Differs From Life Insurance
Compare Product Design, Not Only The Condition Count
What Affects Critical Illness Insurance Premiums?
- Higher coverage amounts and coverage for more illnesses can increase the premium.
- Premiums also reflect your age, smoking status, health history, term, renewal basis, and riders. Not all policies offer level premiums: some guarantee premiums for the policy term, some schedule increases, and others renew at future rates.