Understanding Critical Illness Insurance in Ontario
(Five-minute read)
Life has a way of throwing things at us, and it generally seems to happen when we’re not at all prepared (just look at the last few years). But in reality, is anyone actually ready for when bad things happen? Unexpected life events are sure to bring some level of chaos and preparing ahead of time is essential to lessen the burden as much as possible.
Critical illness is one of the biggest curveballs life can throw your way and it can put you and your family in a state of emotional and financial turmoil. No one is immune to the potential of a scary and costly illness, and even the healthiest of lifestyles comes with certain risks. Living in Canada, many believe that there is no need to invest in critical illness insurance, but that couldn’t be further from the truth.
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What is Critical Illness Insurance?
Critical illness insurance pays you a tax-free lump sum if you are diagnosed with an illness or condition that is covered by the policy. You can decide how to use the funds in any way that you prefer. The most common allocations for these funds typically include:
Healthcare treatments
Household expenses
Transportation
Business expenses
Replenishing savings
What is the Cost of Critical Illness Insurance in Canada?
Although we’re lucky to have a public health system here in Canada, that doesn’t mean that healthcare isn’t costly. Sudden illness can have a substantial and detrimental effect o(n the finances of a family or individual. Most policies cover either the top 4 illnesses, or a more comprehensive list of up to 25 illnesses.
The approximate monthly costs for $50,000 of critical insurance coverage in Ontario is shown in this table:
| Critical Illness Insurance Monthly Cost for a 35 Year Old in Ontario | ||||
|---|---|---|---|---|
| Cost for $50,000 coverage | Male | Female | ||
| Term Length | 4 Illnesses | 25 Illnesses | 4 Illnesses | 25 Illnesses |
| 10 Year | $17 | $22 | $20 | $23 |
| 20 Year | $21 | $27 | $24 | $30 |
| 30 Year | $39 | $43 | $39 | $43 |
| to Age 75 | $49 | $52 | $46 | $48 |
A recent study was conducted that took a look at the monetary burden that can occur for someone who has been diagnosed with cancer. The average cancer patient in Canada can expect to pay around $250 a month out-of-pocket for things such as medications, caregiver expenses, and travel costs for getting to and from appointments. These costs can be considerably higher if the patient lives in remote or rural areas, and this is only one example of what a health crisis can cost you and your family.
Employment is directly affected in the case of a crucial illness. Yes, the majority of companies do allow for sick time or leave, but this typically only allows for a limited temporary leave, and it all depends on the type of group coverage offered by your employer. There is a good chance that in the case of sudden illness, your health will require you to drop down to part-time hours or stop working completely.
Is Critical Illness Insurance Necessary?
Purchasing critical illness is a choice for every individual, and it’s up to you to weigh the pros and cons for your particular situation. However, there are some things you should consider when making that decision.
Many people fall into the trap of thinking along the lines of “I’m healthy, so I don’t need critical illness insurance.” While it’s wonderful to be healthy, this is naive. The reality is that nearly half of all Canadians will develop cancer at some point in their lifetime, and a serious and life-altering illness affects one in three Canadians in their lifetime. If you’re presently in good health, that means that you’ll likely survive an illness if you’re diagnosed in the future. While that’s fantastic, it makes it even more important to be prepared. That way, it’s much easier to get things back on track once you have overcome your illness.
Others fall into the “I’ll do it later” category. Understandable, but it’s important to understand that the chances of being approved for coverage decrease over time. There’s also a chance that you could be denied coverage if someone else in your family is diagnosed with a condition, even if you’re perfectly healthy. This is important to keep in mind when considering your options.
There’s also the line of thinking that you could simply withdraw funds from your RRSP if you were to fall ill. There are some serious downsides to withdrawing from your RRSP, not to mention it compromises your retirement savings. This should be heavily considered, especially since serious illnesses have a tendency to drag on for some time. Pulling from an RRSP or other source is a short-term solution to a potentially long-term problem.
When you make the choice to pursue critical illness insurance, all of these concerns are alleviated.
What Conditions are Covered by Critical Illness Insurance?
Critical illness insurance covers a variety of serious conditions, depending on the policy. Although the coverage for illnesses and diseases may differ from company to company, the majority of insurance will cover the most common health matters including:
Cancer
Stroke
Heart attack
Blindness
Alzheimer’s
Organ transplants
Paralysis
Multiple sclerosis
Kidney failure
It’s essential that you know what your policy does and does not cover, so you have a clear idea of what to expect if you are affected by one of these ailments or by an illness that doesn’t apply. It’s also important to remember that you cannot purchase coverage for any pre-existing illness or condition. Make sure you read your policy carefully and ask your provider any questions you may have.
Cancer and Heart Attack make up the vast majority of Critical Illness Claims
How Much Critical Illness Insurance Do I Need?
The amount of coverage you will need to protect yourself financially will depend on a number of various factors because everyone’s situation is different. These factors include things like expected retirement date, monthly expenses, amount of savings, and family dynamics. To find out how much critical illness insurance is right for you, try out this living benefits insurance worksheet.
Courtesy of our friends at Manulife
How Long Will I Have to Wait For My Critical Illness Insurance Payout?
In most cases, after your claim has been approved, you should receive your lump sum within 30 days.
So, Is Critical Illness Insurance Worth It in Canada?
Critical illness insurance is absolutely worth having in Canada. Our public healthcare only covers so much, and with all of the uncertainty currently transpiring within our healthcare system not to mention the overarching economic instability, it’s more important now than ever to be protected.
Conclusion
To summarize, the benefits of crucial illness insurance include:
Paying for costly healthcare-related expenses not covered by your provincial health plan
Providing a lump-sum payment that you and your family can use to pay for a variety of things while you deal with your illness or condition
Reducing financial stress on your and your family, so you can focus on your health and getting better
Book a call to learn more about critical illness insurance in Ontario and make sure you and your family are covered, should you find yourself in a healthcare emergency.
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