Critical Illness Coverage

Critical Illness Coverage: Real Added Value or Just a Rip-Off?

Living Benefits, Critical Illness Insurance

Let’s talk about other types of insurance products that you might get pitched.  These products can either be sold independently or as “riders” on an insurance policy.  First, let’s talk about Critical Illness or CI for short.

According to Canadian Cancer Society 1 in 2 Canadians (49% of men and 45% of women; see article here) are expected to develop cancer during their lifetime.  CI is a solution that will pay out the desired coverage amount after someone survives a heart attack, stroke, life threatening cancer, or another covered critical illness for a minimum amount of time, usually 30 days.  The fundamental purpose of CI coverage is to help a family deal with the financial burden caused by the illness, particularly the added burden of treating that critical illness.

The most common question I get with regards to Critical Illness is “well, I have disability coverage through work, so I am all set if I get critically ill.”  We have to recall here that disability coverage commonly replaces a portion of your income, which is what your family already needs for surviving day to day.  However, many Critical Illnesses like Cancer will require a lot of extra expenses like travel, hotels, private alternative treatments and sometimes expensive drugs that are not covered by provincial health or your group benefits at work.  This can financially devastate your family over and beyond the emotional hardship that your family would be going through.

For my young family clients, I usually recommend getting a nominal $20,000-25,000 coverage as a rider on their term life insurance policy, which usually costs $5 to $25 per month with “Return of Premium” (ROP) rider.   Return of Premium essentially means that you get most or all of your CI premiums back at the end of the term of the insurance if you didn’t make a critical illness claim and as long as you don’t cancel it prematurely.  This is handy because ROP means that if you don’t use your CI, you get most or all your money back, pretty sweet deal!

Important questions to ask your Advisor about Critical Illness coverage:

  • What Critical Illnesses are covered by the policy?
  • Does it exclude certain types of Cancers?
  • What is the survivability period?
  • Does the survivability period start when the Critical Illness is diagnosed? If not, when?
  • Are there any exclusions?
  • What will the Return of Premium rider repay, under what conditions and when?

Remember the decision to get Critical Illness coverage is not up to me or your Advisor, it is up to you.  As the advisor, our job is to inform you of the facts and make a good recommendation, but the final decision lies with you.  Remember this is your money, your family, and your decision.