Critical illness insurance

Contrary to what its name would suggest, critical illness insurance does not cover all critical illnesses. Before buying the insurance, here’s what you should know.

What is critical illness insurance?

Critical illness insurance pays an amount if the insured suffers from a critical illness that satisfies the definition in the contract. You can buy critical illness insurance for you or a family member, including your spouse, a child or a grandchild, and you can use the benefit however you see fit.

To be covered, your critical illness must match the definition in the contract

a critical illness insurance contract includes a list of covered illnesses. If the insured suffers from an illness that is not in the contract, the insured won’t receive anything, even if the illness prevents him or her from working or is life-threatening.

For each covered illness, the contract may contain exclusions. For example, the contract may cover heart attacks but specify: “Heart attack does not include elevated biochemical cardiac markers as a result of coronary angioplasty, in the absence of new Q waves”. Given such complex wording, it can be quite challenging to figure out what exactly is excluded.

Martha suffers from a cancer that has prevented her from working for nearly a year. Nevertheless, the insurer denied her claim. The contract states that for the cancer to be covered, it must affect the tissues surrounding the cancerous organ. But according to the available medical information, that isn’t her situation.

Therefore, although the contract covers this type of illness, Martha won’t receive anything because her cancer does not satisfy the definition in the contract.

Critical illness and death

Critical illness insurance pays you during your lifetime. In general, an insured must survive for at least 30 days following the diagnosis for the insurer to pay the indemnity.

 

Don’t be swayed by sales pitches like: 

“Most of us will be diagnosed with a critical illness in our lifetime.”

Even if it were true, your contract must cover the critical illness diagnoses.

If you want to be covered in the event you suffer an illness that prevents you from working, consider taking out disability insurance instead, while making sure that the insurance will cover you if you’re no longer able to perform your work.

Critical Illness Insurance Supervisory Report

Critical Illness Insurance Supervisory Report (pdf - 2 MB)This link will open in a new windowUpdated on January 14, 2022The Autorité des marchés financiers (AMF) is publishing the results of its critical illness insurance supervisory work involving the largest critical illness insurers in Québec.

Some differences between critical illness insurance, disability insurance and life insurance

Features Critical illness insurance Disability insurance Life insurance 
Coverage
  • Pays out the agreed amount if the insured suffers from a critical illness that precisely matches the definition in the contract.
  • Pays a periodic amount in the event of disability.

    The disability must satisfy the definition in the contract.
  • Pays the beneficiaryThe beneficiary is the person who will receive insurance benefits (money paid by the insurer). For example, the beneficiary of a life insurance policy is the person who will receive the money if the insured dies. the amount in the contract if you die while the contract is in effect.
Limitations
  • The illness must be included and satisfy the definition in the contract.

    In general, you must survive the illness for a period specified in the contract (e.g., 30 days).
  • You could therefore be diagnosed with a critical illness and not receive any money, even if you become disabled.
  • The insurance replaces a certain percentage of the income you earned before the disability (e.g., 66%).
  • Your beneficiary receives the indemnity when you die.
Some possible uses
  • Pay for private health care services.
  • Enable your spouse to stop working temporarily.
  • Meet new expenses resulting from the illness (adapting a vehicle, building an access ramp, paying for home care, paying children’s expenses, etc.).
  • Retire earlier.
  • Maintain your standard of living despite the disability.
  • Help your family maintain their lifestyle after you die.
  • Pay the funeral expenses.
  • In some cases, maximize the inheritance.

Documentation and tools

How to choose critical illness insurance