Critical Illness Insurance
Critical illness insurance is an insurance product, where the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the critical illnesses listed in the insurance policy. Critical illness insurance is a relatively new type of health insurance in Canada: it was introduced in 1992. Critical illness insurance was founded by Dr. Marius Barnard, with the first critical illness product being launched on the 6th of October 1983 in South Africa, under the name dread disease insurance. Since 1983, the cover has been accepted into many insurance markets around the world.
“Sickness comes on horseback but departs on foot” (Dutch Proverb)
Critical illness insurance offers help paying costs associated with life-altering illnesses. The coverage ranges from $25,000 up to $2,000,000 and can be for 10 years, to age 65, to age 75, or to age 100 (permanent coverage). The premium will be returned to you if you do not claim after 10 years or by age 75.
The policy may be structured to pay out regular income and the payout may also be on the policyholder undergoing a surgical procedure, for example, having a heart bypass operation.
The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed. The survival period used varies from company to company.
The contract terms contain specific rules that define when a diagnosis of a critical illness is considered valid. It may state that the diagnosis need be made by a physician who specializes in that illness or condition, or it may name specific tests, e.g. EKG changes of a myocardial infarction, that confirm the diagnosis.
Coverage can also vary according to the degree of severity of, or conditions associated with, an illness or disease. For example, if a person is diagnosed with a type of cancer that is treatable and that results in minimal “down time”, they may not be eligible to make a claim.
Coverage cannot be purchased for a pre-existing condition or illness.
Critical Illness Insurance
- Provides a tax-free lump sum of money usually 30 days after a person is diagnosed with an insured illness
- Helps the person maintain their financial standing, while getting the best treatments possible
- Doesn’t affect person’s ability to still work
- If the person dies, all premiums are refunded to his or her beneficiary
- Available to people ages from 18 to 65
- Available as an independent insurance plan or as an additional feature within another life insurance policy
Uses of Critical Illness Insurance
There are no any conditions as to how you use the funds. The money unconditionally belongs to you. It’s up to you how it will be spent. The finances received could be used to:
- pay for the costs of the care and treatment, get the latest treatments and best medical services available
- pay for private nursing care
- pay for recuperation aids
- allow your partner to spend time taking care of you instead of going to work
- replace any lost income due to a decreasing ability to earn
- support a change in the lifestyle
- modify your home to have better mobility
- pay off your debts, your mortgage, pay for child care, hire domestic help, etc.
The full sum assured may be paid on diagnosis of the critical illness, but then no further payment is made on death, effectively making the critical illness payment an ‘accelerated death payment’.
List of Illnesses Covered by Critical Illness Insurance
Although they differ from company to company, typical illnesses and diseases covered by critical illness insurance include:
- Acquired brain injury
- Alzheimer’s disease
- Aortic surgery
- Aplastic anemia
- Benign brain tumour
- Bacterial meningitis
- Coronary artery bypass surgery
- Heart attack
- Heart valve replacement
- Kidney failure
- Loss of limbs
- Loss of speech
- Major organ transplant
- Major organ failure on waiting list
- Motor neuron disease
- Multiple sclerosis
- Occupational HIV infection
- Parkinson’s disease
- Severe burns
Due to the fact that the incidence of a condition may decrease over time and both the diagnosis and treatment may improve over time, the financial need to cover some illnesses deemed critical a decade ago are no longer deemed necessary today. Likewise, some of the conditions covered today may no longer be needed a decade or so in the future.
We’ll provide you with a complete explanation of your coverage and help you to find the plan which is right for you.