Is critical illness insurance worth it in Canada?
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One day you’re heading to work with the usual 9-5 grind and picking up your child from after school care, and the next day you suddenly develop some slurred speech, some trouble walking, and numbness and difficulty moving in your right side. You had a neck adjustment done for neck pain from a chiropractor the week before. You had a bit of a headache the day before and some temporary vision loss when you got up too quickly but you attributed it to being over tired or dehydrated.
Your husband takes you to the hospital and you get a scan of your head and neck, and are diagnosed with a stroke from an internal carotid artery dissection, or a separation of the layers in your arteries. You are transferred from the emergency department to the stroke unit and are there for days to weeks for further testing and rehabilitation.
Unfortunately you do not regain function on your right side and cannot walk and are dependent on others for a lot of the things you used to do in your everyday life, like dress yourself, and take yourself to the bathroom.
Your husband and daughter are dependent on the dual income you contribute to, to pay the mortgage, pay the groceries, and other household bills, and sick time is going to run out from your employer and disability is not enough to pay for all your bills.
Your life is suddenly no longer the same.
No one expects critical illness to happen to them, but unfortunately sometimes it does.
Life is unpredictable.
Most of us take our health for granted until we no longer have it.
The last thing you want to worry about after already losing your ability to function independently is your family’s economic survival.
This is where critical illness insurance can come in.
Table of Contents
What is Critical Illness Insurance in Canada
According to Investopedia, critical Illness insurance was developed in the 1990’s in the United States for additional financial coverage for severe illness such as heart attacks, cancers, or strokes.
It is a tax free lump sum cash payment in the event you are diagnosed with one of the critical illnesses as defined in the insurance agreement. Critical Illness Insurance usually pays out between $10,000 to $1,000,000 CAD.
There are usually a limited number of conditions that critical illness insurance covers. Here is the list that PolicyMe covers, they cover 44 conditions, the most of any insurance provider in Canada.
Some conditions covered are:
- Heart attack
- Coronary Artery Bypass Surgery
- Bacterial Meningitis (with neurologic deficits seen after 90 days from diagnosis)
- Parkinsons Disease
- Motor Neuron Disease (e.g. ALS)
- Multiple Sclerosis
- Kidney Failure
The tax free lump sum payment goes to you instead of your beneficiary (unlike life insurance) so you can use it as income replacement or as additional help for medical expenses that are not covered by Canada’s health care system.
PolicyMe’s Critical Illness Insurance is underwritten by Canadian Premier Life Insurance Company.
Do I need critical illness insurance in Canada?
According to PolicyMe, 44% of Canadians don’t have life insurance, 40% of which say it’s because they can’t afford it.
Critical Illness Insurance is quite affordable and if you might need it (e.g. your household is dependent on your income, you don’t have much in emergency savings) you should consider it, since critical illness is more likely to happen to you than premature death.
You might need critical illness insurance in Canada if:
- You have young children and they depend on your income or your ability to care for them (e.g. you are a SAHP)
- You don’t have critical illness benefits from your employer
- You don’t have extended health benefits (e.g. if you need physiotherapy and don’t have benefits)
- You don’t have an emergency fund of 6 months of living expenses or post-tax income
- You are self-employed or a freelancer
Here are some morbid and sobering critical illness statistics in Canada:
- Information from the Government of Canada website: There are over 878,500 Canadians over the age of 20 who have experienced a stroke. 25% of Canadians who have had a stroke are under the age of 65.
- 1 in 12 Canadians (over 2.6 million of us) over the age of 20 have diagnosed heart disease. Heart disease is plaque built up in arteries of your heart and can lead to heart attack or heart failure.
- From the Canadian Cancer Society, Cancer is the leading cause of death in Canada, and 2 in 5 Canadians are expected to be diagnosed with cancer in their lifetime. That’s 43.5% of men and women in Canada.
How much does Critical Illness Insurance Cost in Canada?
As with life insurance, critical illness insurance is more expensive if you are a smoker and if you are older at the time of application.
You can run the numbers here for an instant quote (without entering any email address).
Most people choose 3-6 months of their post tax income as the coverage amount.
So for a female in their late 30’s who is a non-smoker, for a 20 year term and $25,000 of tax free lump sum coverage in the event of critical illness, it is $19.82/month in insurance premiums.
For a male in their late 40’s who is a non-smoker, for a 20 year term and $25,000 of tax free lump sum coverage, it is $41.14/month in insurance premiums.
The rate is locked in and doesn’t change over your 20 year term.
If you are a female in your 70’s (you have to be under age 75) and wanted a $250,000 tax free lump sum payment for a 10 year term (up to age 85), the monthly insurance premium is $1138 per month.
Here’s a sample of PolicyMe’s Critical Illness Insurance Policy including all the criteria and waiting periods required for the 44 health conditions.
Critical Illness Insurance Pros and Cons
Here are some advantages and disadvantages of critical illness insurance.
Advantages of PolicyMe’s critical illness insurance:
- A tax free lump sum payment
- The rate you pay is locked in and doesn’t change over your term
- You can apply as long as you’re under 75 years old but the maximum term you can get is 10 years
- There are 44 conditions covered, the most in Canada
- You can choose to extend your term after you have paid 5 years in premiums, e.g. a 20 year policy can be changed to a 25 year or 30 year policy
- You can cancel within 30 days and receive a refund for your premiums paid- Critical illness insurance return of premium will be maid if you ask for a refund within 30 days of the policy being active
- You can cancel anytime and not have to pay penalties or fees
- Fast decision, you’ll find out if you’re approved within 15 minutes
- You can get Critical Illness Insurance as a stand-alone and don’t need to get life insurance
Disadvantages of PolicyMe’s critical illness insurance:
- Your policy will have to be active for 90 days before a cancer diagnosis for it to cover cancer
- Your policy will have to be active for 1 year before a Parkinsons or Multiple Sclerosis diagnosis is made
- There are specific criteria to meet for coverage, you should read the policy carefully
- It is done online if you are not Internet savvy this might be difficult
Life Is Like a Box of Chocolates
The above story about the internal carotid artery dissection is actually similar to my own story.
A few years ago I was diagnosed with a carotid artery dissection. Thankfully a clot did not lodge in my brain and I did not have a stroke. I was hospitalized for a few days, it was hard on my family and I, but I was lucky and got treatment in time.
There are others who are not so lucky and have debilitating permanent damage from a stroke- I know someone who actually had a chiropractic neck adjustment, quit his job a few months prior to his critical illness because they denied his request for vacation, and suffered a stroke and was therefore unable to access disability benefits from his employer because he had quit already.
Life as we know it, is fragile, and as Forrest Gump says, “Life is like a box of chocolates. You never know what you’re gonna get.”
Therefore it makes sense to protect you and your loved ones from financial distress in the event of critical illness.
Here’s a link to the PolicyMe quote you can get without having to enter any contact info details.
Do you have critical illness insurance?
Do you think critical illness insurance is worth it in Canada?
GYM is a 40 something millennial writing about personal finance since 2009 and interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for a free dividend yield spreadsheet and the free Young Money Bootcamp PDF.