If you’re diagnosed with a critical illness, government and employer health plans may cover some of your treatment costs. However, Critical Illness Insurance provides additional benefits that can ease the financial burden during such challenging times. But is it a wise addition to your insurance coverage? Let’s break it down and help you decide if Critical Illness Insurance is right for you.
What is Critical Illness Insurance?
Critical Illness Insurance provides a lump sum payout upon the diagnosis of severe, life-threatening conditions like cancer, heart attacks, or Parkinson’s disease. The money is given to the policyholder immediately upon diagnosis and can be spent however they see fit. It can help cover:
- Home modifications (e.g., installing ramps, no-barrier showers)
- Replacing the income of a caregiver (e.g., a spouse or partner)
- Hiring home care assistance (e.g., nursing or PSWs)
- Purchasing mobility aids
- Funding alternative treatments (e.g., acupuncture, massage)
- Travel expenses for medical treatment far from home
- Extra childcare support
- Mental health services
This financial support ensures you can focus on recovery without the added stress of financial strain.
What Illnesses are Covered by Critical Illness Insurance?
While coverage may vary, insurers typically cover the most common life-threatening illnesses:
- Cancer: Accounts for around 67% of all claims.
- Heart attacks and strokes: Make up approximately 24% of claims.
- Other illnesses: Such as blindness, organ transplants, and Parkinson’s disease, constitute about 6%.
- Rare conditions: The remaining 3% include less common critical illnesses.
Generally, insurers cover around 26 illnesses, but some plans may include more. Large providers offer both basic plans (covering 3 to 5 illnesses) and more comprehensive policies (covering up to 26 illnesses) with additional perks, such as access to global health services like Best Doctors.
Key Illnesses Typically Covered
- Brain and neurological disorders
- Eye, ear, and throat conditions
- Heart diseases
- Cancer
- Organ-related illnesses
- Bone marrow-related diseases
These are the core conditions covered under most Critical Illness policies. However, exceptions and payout conditions may apply, so it’s important to review the specifics of your policy.
What Are the Benefits of Critical Illness Insurance?
One of the standout features of Critical Illness Insurance is the Return of Premium (ROP) option. If you don’t file a claim during the life of the policy, you may be eligible to receive a full refund of the premiums you paid, typically after 15 to 20 years or when you reach age 65 or 75. This is a valuable option if you remain healthy and don’t need to use the insurance.
Additionally, many policies offer partial payment benefits, sometimes called early discovery benefits. These are small payouts (usually 10-25% of the policy value) for less severe conditions, like non-life-threatening cancers or heart surgeries, without affecting the final payout should a more serious illness occur later.
Riders and Additional Features
Critical Illness Insurance can be customized with riders to enhance coverage:
- Disability Waiver of Premium Rider: Waives premium payments if you become disabled.
- Second Event Rider: Offers additional coverage in the event of a second critical illness.
- Loss of Independent Existence Rider: Provides coverage if you become dependent on others for daily living activities.
Policies generally last for 10, 20, or until age 75 or 100, and premium costs can vary. Shorter terms usually offer lower premiums, and some insurers allow you to lock in your premium rate to avoid future increases.
How Much Coverage Do You Need?
The most common coverage amount for Critical Illness Insurance is $100,000. However, policies can vary, and the right amount for you depends on your needs. For example:
- Manulife Insurance: Offers the LivingCare benefit, which provides monthly payments if you become functionally dependent.
- Ivari: Offers competitive rates but only includes Critical Illness coverage as part of a life insurance policy.
- Desjardins: Offers a shared ownership plan for key employees in companies, with potential return of premiums and no tax implications.
It’s advisable to consult with a broker to understand which insurer and policy best fit your situation.
Factors to Consider When Applying for Critical Illness Insurance
Statistics show that a 25-year-old male non-smoker has a 24% chance of developing a critical illness like cancer, a heart attack, or a stroke before age 65. This makes it more likely for this individual to suffer from a critical illness than to pass away prematurely. Fortunately, medical advancements have significantly improved recovery chances.
When applying for Critical Illness Insurance, keep the following in mind:
- Pre-existing Conditions: If you’ve already been diagnosed with an illness, you may be ineligible for coverage.
- Policy Type: Choose between basic or comprehensive coverage.
- Term Length: Consider whether you need temporary or permanent coverage.
- Return of Premium: Decide when you’d like to receive your premium refund (e.g., at expiry or upon death).
- Family History: A family history of critical illnesses may affect your premiums and eligibility.
- Simplified Issue: Some policies offer simplified underwriting, making it easier to qualify.
Conclusion
Critical Illness Insurance provides invaluable financial support when faced with severe health conditions. By offering lump sum payouts and various benefits, it ensures you can focus on recovery rather than financial stress. However, as with all insurance policies, it’s crucial to fully understand your options and select the best coverage for your specific needs.