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Is Critical Illness Insurance Worth It?

August 10, 2026

16 Min Read

Keph Senett Keph Senett

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“What if something serious happened to me?”

It’s a worrisome question that many Canadians don’t like to think about but often lingers in the back of their minds. After all, if you’re generally healthy, it’s easy to assume that a critical illness is something that happens to someone else. And even if the unexpected did happen, wouldn’t your provincial or territorial health insurance plan, or workplace benefits, if you have them, cover the costs?

The reality is more complicated. Canada’s health care system covers a lot of medically necessary services, but it doesn’t cover everything, for example medical equipment used at home or ambulance fees. If you’re diagnosed with a serious medical condition, the costs can add up fast — from prescription drugs and home care to travel for treatment. At the same time, you may need to take time off from work, cutting into your income just as the medical bills start to come in.

That’s where critical illness insurance comes in. It’s a policy that can pay a tax-free, lump-sum benefit if you’re diagnosed with a covered serious illness, giving you money to help cover expenses, replace lost income, or simply focus on your recovery.

But is critical illness insurance worth it? This article explores what is critical illness insurance, what it covers, and who it’s designed to protect, so you can decide whether it’s the right fit for you and your family.

Key takeaways

- Critical illness insurance is a policy that can pay a tax-free, lump-sum benefit if you’re diagnosed with a covered serious illness or medical condition and meet the terms of your policy.
- You decide how to use the money — whether it’s replacing lost income, covering everyday bills, paying for medical expenses, or supporting your recovery.
- Some policies offer an optional return of premium (ROP) for an extra cost, allowing you to recover some or all of the premiums you paid if you never make a claim.
- Whether critical illness insurance is worth it depends on your finances, the coverage you already have, and how much financial risk you’re comfortable taking on yourself.

How does critical illness insurance work in Canada?

Critical illness insurance is a type of insurance that can pay a tax-free, lump-sum benefit if you’re diagnosed with a covered serious illness or medical condition and meet the terms of your policy. Just like with other types of insurance, you pay a monthly premium for the coverage and can make a claim in the event of a diagnosis.

Typically, the process works like this:

Choose your coverage. Select a policy and coverage amount. An underwriter will then review your application to determine your eligibility. Once approved you’ll pay regular premiums to your insurance company.
File a claim. If you’re diagnosed with a covered condition — such as multiple sclerosis, heart disease, or life-threatening cancer — you may submit a claim to the insurance company.
Receive your benefit. If your claim is approved and you satisfy the policy’s survival period (typically, 30 days, depending on the condition), you receive a tax-free, lump-sum payout.

Critical illness insurance is different from disability or life insurance. Disability insurance is designed to replace a portion of your income if you can’t work because of a covered illness or injury, typically through weekly or monthly payments. While that can help replace lost income over time, it may not be enough to cover the larger, upfront expenses that often come with a serious diagnosis.

Life insurance pays a tax-free benefit to your beneficiaries after you die, whereas critical illness helps you manage the financial impact of a serious diagnosis while you’re alive.

Learn more about what critical illness insurance is.

The cost of critical illness in Canada

Canadians have access to universal health care, but a critical illness can come with a long list of expenses that have nothing to do with medical treatment or a hospital stay. Even if you have workplace benefits or extended health coverage, you may still face hefty bills for expenses at a time when your income may be reduced.

For example, the Canadian Cancer Society reports that cancer costs the average Canadian patient nearly $33,000 in their lifetime, including out-of-pocket expenses and lost income during treatment and recovery.

Some of the expenses to consider include:

Loss of income. A serious illness doesn’t just affect your health — it can affect your wallet, too. You may need weeks (or even months) away from work to recover. Most people only have so many paid sick days per year, and vacation time can run out fast.
Travel expenses. Specialized care isn’t available in every community. If you live in a rural or remote area, treatment may mean paying for gas, flights, hotels, meals, or parking.
Home care. During recovery, you may need help in your home, whether that’s nursing care, meals support, or in-home rehabilitation. Those services can easily cost $30 an hour or more, depending on where you live, the type of care you need, and how often or how long you need it.
Childcare. If you’re a parent, you might need someone to look after your children while you’re attending appointments, receiving treatment, or recovering at home. Just like with home care support, the cost will depend on your situation, as well as the age of your kids.
Mortgage or rent payments. The bills don’t stop even if you need to rest. Monthly living expenses, like rent or mortgage payments, property taxes, utilities, transportation, and groceries, and other monthly bills, still need to be paid whether you’re working or not.
Experimental treatments and prescription drugs. Provincial or territorial health plans generally don’t cover most prescription drugs taken outside a hospital. The same goes for some rehabilitation services and other auxiliary treatments, like massage, osteopathy, physiotherapy, and acupuncture. Depending on your diagnosis, you may also consider experimental treatments or other therapies that aren’t covered by your provincial/territorial health plan or workplace benefits, leaving you to pay some or all of the cost yourself.
Mental health and recovery support. A critical illness diagnosis can wear on your mental health as well as your physical well-being. Counselling or therapy can help you and your family navigate your new situation, but sessions are generally billed at $125 to $225 an hour or more.

None of this is meant to be alarming. It’s simply the reality that a serious illness can affect far more than your health. Understanding the potential impact can help you decide whether critical illness insurance is something that belongs in your financial plan.

What can I use a critical illness insurance payout for?

Here’s something many people don’t realize about critical illness insurance: once your claim is approved, the money is yours to use however you need it most. Unlike disability insurance, which typically pays a weekly or monthly benefit to replace part of your income, critical illness insurance provides a tax-free, lump-sum payment.

There are no receipts to submit and no restrictions on how you spend the money. Whether you need help paying the bills, covering treatment costs, or simply buying yourself time to recover, the choice is yours. Here are some common ways people use the payout from critical illness insurance.

Medical and treatment expenses

When you receive a critical illness diagnosis, the last thing you want to worry about is whether a drug, treatment, or type of care is covered. You can use your payout for:

Prescription medications not covered by your provincial/territorial health care plan or workplace benefits;
Private nursing care, home care, or personal support workers;
Alternative therapies (e.g., acupuncture or massage) or emerging experimental treatments (e.g., RNA regeneration for heart attacks) that aren’t typically covered by your provincial or territorial health plan;
Travel and accommodation if you need specialized treatment in another city, province, or country.

Replace lost income and cover living expenses

Life doesn’t stop because you’re recovering. The mortgage still needs to be paid. Groceries still need to be bought. Kids still need to get to school.

For many Canadians, the biggest financial challenge isn’t the medical bills — it’s the paycheque that shrinks or stops coming altogether. This can be especially true for self-employed individuals, small business owners, or anyone without comprehensive workplace benefits. Plus, partners or family members may need to reduce their own working hours to care for you.

Your lump-sum payment can help ease any financial strain and help cover:

Rent or mortgage payments;
Utilities and groceries;
Childcare and school expenses;
Credit card and loan payments;
Car insurance and transit costs.

Additional expenses

Then there are the expenses many people don’t think about until they’re dealing with them. The help you and your family might need depends on many factors including where you live, family makeup, and type of illness. Your benefit could be used to help cover everyday expenses, such as:

Hiring help at home, like a cleaner, cook, or childcare professional;
Modifying your home with accessibility supports, such as shower grab bars, a hospital bed, or specialized equipment;
Paying down existing debt to relieve financial pressure on your family;
Taking time to make thoughtful decisions about your treatment, career, or next steps without feeling rushed by financial concerns;
Help a loved one take time away from work to support your recovery.

The point is that every diagnosis is different, and so is every family’s financial situation. Having the flexibility to use the money where it’s needed most can give you some breathing room, allowing you to focus on your recovery.

What happens if I never make a critical illness insurance claim?

It’s a common question people ask: What if I never get sick? Am I just throwing money away?

If you never need to make a critical illness insurance claim, that’s good news. It means you never experienced one of the serious medical conditions your policy was designed to protect against. Throughout that time, you had the peace of mind of knowing you had a financial safety net if something unexpected happened.

That said, some people like the idea of getting back some money if they never make a claim. Some critical illness insurance policies offer a return of premium (ROP) option, where you can get back some or all of the premiums you’ve paid if certain conditions are met.

About return of premium

Depending on your policy, you may be eligible for a ROP in a few different situations:

Your policy ends without a claim. If you never make a claim during your policy’s term, you may be eligible to get back some or all of your premiums.
You cancel your policy. Some policies allow you to receive a ROP if you cancel your policy after a certain time (e.g., 15 years).
Death. If you pass away without ever making a claim, your beneficiaries may receive a refund of eligible premiums.

Return of premium isn’t available with every policy, and eligibility rules vary by product and insurer. If this feature is important to you, speak to a licensed RBC Insurance advisor to understand how it works.

Is critical illness insurance still worth it without the return of premium option?

Whether a ROP option is worth it ultimately comes down to what you value most. Some people prefer to pay higher premiums to receive some of their money back if they never make a claim. Others would rather keep their premiums lower and forgo the ROP option.

The difference is that critical illness insurance policies without a ROP option are typically more affordable, while still providing the same financial protection if you need to make a claim. In other words, you’re not giving up the core benefit of the coverage. You’re simply choosing a different pricing option.

Think of it like car insurance. Most people don’t regret paying for coverage, even if they never file a claim. The value isn’t in using the insurance — it’s in knowing it’s there if you need it.

The same idea applies to critical illness insurance. It’s there to help protect you financially if the unexpected happens.And while no one likes to think about it, serious illnesses are more common than many people realize.Yet nearly 30 per cent of Canadians say their savings would run out within six months after a major health setback.

The numbers tell the story. Nine in 10 Canadians have at least one risk factor for heart conditions, stroke or vascular cognitive impairment, and two in five Canadians are expected to be diagnosed with cancer in their lifetime. If you want to be prepared, critical illness insurance can help — with or without return of premium.

When critical illness insurance is worth it

Everyone can benefit from having critical illness insurance coverage, particularly if you:

Own a business or are self-employed. Without employer benefits,you may have fewer financial supports to rely on if you’re unable to work.
Have children or people who depend on your income. A lump-sum benefit can help keep the household running while you recover.
Have a family history of conditions like cancer, heart disease, or other covered conditions. While family history doesn’t guarantee you’ll develop a serious illness, it may prompt you to think more carefully about protecting your finances.
Are young and healthy. Buying coverage earlier in life may help you qualify for lower premiums while you’re in good health.Your specific premium will vary depending on factors like age, health status, and other elements.
Have a mortgage or significant financial obligations. If losing your income would make it difficult to keep up with monthly expenses, critical illness insurance can provide an added layer of financial protection.
Have employer benefits with coverage gaps. Even if you have insurance through work, it may not fully cover lost income or all of your out-of-pocket expenses following a serious illness.
Have significant assets or estate planning goals. Depending on your circumstances, a larger lump-sum benefit may help preserve your wealth or provide greater financial flexibility during recovery.

When critical illness insurance may not be worth it

Critical illness insurance isn’t a necessity for everyone. It may be less of a priority if you:

Already have a strong financial safety net. If you have a substantial emergency fund or other savings, you might not need additional coverage.
Already have comprehensive insurance coverage. If your workplace benefits provide generous disability coverage and extended health benefits, you may already have enough financial protection.
Have few financial obligations. If you have little debt, low monthly expenses, and could comfortably manage a temporary loss of income, critical illness insurance may not be necessary.
Don’t have dependents. If no one relies on your income, the financial hit of a serious illness may be easier to manage.
Have other financial priorities. If you don’t have room in your budget to pay for insurance premiums, it may make more sense to focus on building an emergency fund, paying down high-interest debt, or securing essential insurance before adding critical illness coverage.

Is critical illness insurance right for you?

Whether critical illness insurance is right for you depends on one simple question: If you were diagnosed with a serious illness tomorrow, how would you pay the bills?

If you already have robust savings, workplace benefits, or enough financial flexibility to weather months away from work, you may decide you don’t need additional coverage. But if a prolonged loss of income or unexpected expenses would put pressure on your finances, critical illness insurance may be worth considering.

At the end of the day, this isn’t about expecting the worst. It’s about giving you and your family more options if life doesn’t go according to plan. The right policy won’t prevent a serious illness, but it can help protect your savings, your family’s finances, and the freedom to focus on getting better instead of worrying about money.

And if one of your biggest concerns is paying for coverage you never use, remember that some policies offer a return of premium option. If you never make a claim and meet the policy’s terms, you may be eligible to recover some or all of the premiums you paid.

Still unsure? Use our critical illness insurance calculator to estimate how much critical illness insurance you might need and how it might fit into your budget. A licensed RBC Insurance advisor can help you review the coverage you already have, spot any gaps, and decide whether critical illness insurance makes sense for your situation.

No one can predict the future. But you can decide how prepared you want to be for it.

RBC Critical Illness Insurance

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Statistics cited in this material are for informational and educational purposes only and are sourced from third-party research. They are not intended to represent the scope of coverage provided under RBC Insurance’s critical illness insurance products. Please refer to the policy for a complete list of covered conditions, definitions, and eligibility requirements, or speak to your insurance advisor.