When Should You Buy Critical Illness Insurance?

You never think it’s going to happen to you or someone you love, but every day, hundreds of Canadians are diagnosed with a critical illness.

The Canadian Cancer Society estimates that 254,800 Canadians will receive a cancer diagnosis this year, and over 3.5 million Canadians are living with heart disease or stroke, according to the Heart and Stroke Foundation. Thanks to research and medical advancements, many Canadians can survive a critical illness, but the recovery often requires significant time and financial resources. 

That’s where critical illness insurance comes in. It can help provide financial support and peace of mind during a major health challenge, giving you and your family more financial stability while you recover.

Here we explain what critical illness insurance is, why it’s important, and provide tips to help you determine why you should consider buying critical illness insurance to protect yourself and your loved ones.

Key messages

• Critical illness insurance in Canada provides a one-time lump-sum benefit if you’re diagnosed with a serious illness or condition. 

• The lump-sum benefit, anywhere from $25,000 to $2 million, is paid directly to you, and you choose how to use it.

• Critical illness coverage can complement other forms of insurance, like life insurance or disability coverage.

• Factors like your family medical history, dependents, and financial circumstances can help you decide when to buy critical illness insurance.

Understanding critical illness insurance in Canada

Critical illness insurance is a one-time lump sum payment that you can use to cover lost income or other expenses if you’re diagnosed with a serious illness or condition covered by your insurance provider.

The amount of money you receive from critical illness insurance depends on how much coverage you choose. With RBC’s critical illness insurance, overage can range from $25,000 to up to $2 million. In most cases, the lump-sum benefit is paid once you’ve been diagnosed. Typically, the payout is not subject to income tax and you can use the money to cover extra healthcare expenses, make your home more accessible, or whatever you choose. 

The list of critical illness covered can vary between insurers, so it’s important to read your policy carefully to understand which diseases or conditions are covered under your policy. A qualified insurance advisor can also answer any you have questions.  

Common examples of critical illnesses covered include:

• Alzheimer’s disease

• Cancer

• Heart attack

• Multiple Sclerosis

• Stroke

Critical illness insurance in Canada is different than the health insurance coverage you might receive through your workplace group benefits. Your workplace benefits can help to cover medical services and treatment options that aren’t paid by your provincial or territorial health care plan. For example, prescription drugs, vision care, or dental care. The payout for these services goes to the health-care provider. With critical illness coverage, the payout goes directly to you, and you decide how you want to use it.  

Why critical illness insurance is important

In Canada, we’re fortunate to have universal health care, which may lead some to question whether critical illness insurance is also necessary. While it may not be the right fit for everyone, there are many situations where critical illness insurance can provide meaningful support:

• Prevents paying out-of-pocket: Provincial and territorial healthcare plans don’t cover everything. Critical illness insurance can help cover treatments and services that require out-of-pocket payment. For example, physiotherapy, medical equipment, or private nursing. 

• Offers income protection: If you’re unable to work due to your condition, critical illness insurance helps provide income protection and financial security for you and your family. It gives you the ability to focus on your recovery without worrying about day-to-day finances.

• Provides flexibility: With critical illness insurance, the lump sum payment goes directly to you, and you can choose how you want to use it. Whether it’s paying for extra childcare while you recover, covering the mortgage, or hiring home help, the choice is yours.

• Fills in insurance coverage gaps: Critical illness coverage acts as a complement to other forms of insurance, like life or disability coverage. Life insurance only pays out if you die, and while disability insurance is designed to replace a portion of your earnings, it doesn’t provide a lump-sum payout. Adding critical illness insurance provides more robust protection.

7 factors to consider when buying critical illness insurance 

If you’re questioning whether critical illness insurance is right for you and your family, here are some important factors to consider.

1. Family medical history

Some critical illnesses have a genetic component that may increase your risk. So, if you have an immediate family member who was diagnosed with conditions such as cancer or heart disease, you might feel protected taking out critical illness coverage earlier.

Having extra coverage in place can provide peace of mind knowing you’ll have the financial resources you need to focus on your recovery if you became ill.  

2. Age and health 

When you’re young and healthy, critical illness insurance is probably not top of mind. However, this time of your life is when you can benefit the most from lower premiums and more coverage options.

As you age, or if you have a pre-existing condition, you’re more likely to pay higher premiums or even be excluded from taking out critical illness insurance.

3. Lifestyle and occupation

If you’re inactive, smoke, drink alcohol excessively, and have poor nutrition, it could increase your chances of developing a critical illness. Working in certain occupations may also expose you to greater health risks. For instance, jobs that expose employees to solar radiation, asbestos, diesel engine exhaust, and crystalline silica may lead to a higher risk of developing cancer, according to the Canadian Cancer Society. 

Small business owners and entrepreneurs should also consider additional financial protection if you’re diagnosed with a critical illness and can’t bring in an income.

4. Major life event 

Milestones such as getting married or buying your first home can prompt the need for additional financial protection. If you fall ill and your partner takes time off work to care for you, critical illness insurance can help support your shared expenses.

Critical illness insurance can also help cover your mortgage payments if you or your partner is unable to work.

5. Dependents 

If you’re the primary earner and have children, a partner, or other dependents who rely on your income, critical illness insurance can help financially support your loved ones, should you become critically ill. 

6. Financial situation 

Evaluating your current financial situation can help you determine if you have enough of a financial safety net to cover essential expenses, debts, and the added costs associated with recovering from a critical illness.

If you don’t have a robust emergency fund or enough savings to cover your mortgage and other expenses for at least six months, then critical illness coverage can help cover the shortfall.

7. Existing coverage 

Review your current health and life insurance policies. For instance, if you have a group policy through work, review whether it covers you for critical illness and how much coverage you’d receive. This can help you identify any gaps.

This critical illness insurance calculator can help you estimate how much coverage you’ll need. You can also speak to a licensed insurance advisor for more tailored advice.

How to choose the right policy

Critical illness insurance policies vary in terms of eligibility requirements, which conditions are covered, benefit amounts, and premiums. To help you choose the right plan, keep the following points in mind:

Assess your needs

Take time to evaluate if critical illness insurance is necessary based on your unique needs. Consider any health risks: Do you have a family history of cancer, heart disease, Alzheimer’s, or other critical illnesses?

Look at your current financial situation: Do you have enough savings to fall back on if you are unable to work for an extended period due to illness?

Review other types of coverage to see where you have gaps in critical illness insurance, and to determine how much coverage you might need.

Read the fine print

Make sure you read and understand your critical illness policy. You should review the list of conditions covered and how they are defined. Look for exclusions and limitations.

Also, check to see if there are waiting periods or survival periods where you won’t be eligible for coverage.

Get professional advice

Trying to purchase the right insurance policy can seem complicated. If you have questions about a specific policy or critical illness coverage in general, reach out to an accredited insurance advisor for personalized guidance.

How critical illness insurance can make a difference

A critical illness diagnosis can bring major changes to your life and your health. It can affect your ability to work, your daily routine, and even family dynamics.

If you’re asking, “Do I need critical illness insurance?” take time to reflect on your current situation. Consider your medical history, life stage, and financial circumstances.

Critical illness insurance is designed to provide financial support during a challenging period. With RBC’s critical illness insurance, you’ll also have access to Teladoc Medical Experts, who can review your medical records and confirm your diagnosis. You can also find help dealing with difficult emotions through our “The Health Journey” program.

Choosing the right critical illness coverage at the right time can help protect both your finances and your family’s well-being, giving you added stability and peace of mind when you need it most. 

FAQs about when to buy critical illness insurance

Is critical illness insurance worth it in Canada?

Whether critical illness insurance is worth it will depend on individual and financial factors, including your age, health, family medical history, lifestyle, and occupational risks, existing insurance coverage, and your financial situation. However, the benefit of having critical illness insurance in Canada is you’ll receive a lump sum pay out, usually tax-free, to cover lost income.

What is the best age to buy critical illness insurance?

The best time to buy critical illness insurance is when you’re young and healthy, as you can benefit the most from lower premiums and more coverage options. Once you have a pre-existing condition, it could lead to higher premiums or even exclusion from critical illness plans.

What is the rule of thumb for critical illness coverage?

While there are no one-size-fits-all rule for how much critical illness coverage you need, a good starting point is to have enough to cover at least six months of salary, essential expenses, and extra costs associated with a critical illness.

Having this financial safety net can help you focus on your recovery instead of worrying about your financial obligations. A critical illness insurance calculator can help determining how much critical illness coverage you’ll need.

Share This Article