Critical illness insurance pays regardless of whether you can or cannot work

Critical illness insurance provides financial protection in the event that a person is diagnosed with a serious illness. Let’s consider some important points about critical illness insurance that you have to know about.

Coverage

Critical illness insurance typically covers a range of serious illnesses and medical conditions, including but not limited to cancer, heart attack, stroke, organ failure, paralysis, and major organ transplant. The specific illnesses covered may vary depending on the insurance provider and policy terms.

Lump Sum Benefit

If the policyholder is diagnosed with a covered critical illness during the policy term and meets the policy’s definition of that illness, they are eligible to receive a lump sum benefit payment from the insurance company. This payment is made regardless of whether the individual is able to continue working or incurs medical expenses related to the illness.

Waiting Period

Critical illness insurance policies typically have a waiting period, also known as a survival period, during which the policyholder must survive after being diagnosed with a covered illness in order to qualify for the benefit payment. This waiting period is usually specified in the policy and can range from 14 days to 30 days or more.

Premiums

The cost of critical illness insurance premiums can vary based on factors such as the individual’s age, health status, smoking status, coverage amount, and policy term. Premiums are typically paid on a monthly or annual basis, and the amount may be guaranteed or subject to change over time.

Exclusions and Limitations

It’s important to carefully review the terms and conditions of a critical illness insurance policy, as there may be exclusions and limitations on coverage. Common exclusions may include pre-existing medical conditions, self-inflicted injuries, and certain types of cancer or illnesses that do not meet the policy’s definition of a covered critical illness.

Renewability

Critical illness insurance policies may offer options for renewability, allowing policyholders to renew their coverage at the end of the policy term. Some policies may also include provisions for converting to permanent life insurance or receiving a return of premium if the policy is not used.

Tax Implications

The lump sum benefit payment received from a critical illness insurance policy is typically tax-free in Canada, which means that the policyholder does not have to pay income tax on the benefit amount. However, it’s important to consult with a tax advisor or financial planner to understand any potential tax implications based on individual circumstances.

Financial Planning

Critical illness insurance can provide valuable financial protection to individuals and their families in the event of a serious illness. It can help cover medical expenses, mortgage payments, living expenses, and other financial obligations during a difficult time. However, it’s important to consider critical illness insurance as part of a comprehensive financial plan that also includes savings, investments, and other forms of insurance coverage.

Before purchasing a critical illness insurance policy, it’s advisable to compare quotes from multiple insurance providers, understand the policy terms and coverage options, and consult with a licensed insurance advisor or financial planner to ensure that the policy meets your individual needs and circumstances.