How to choose critical illness insurance

Determine your insurance needs

Compare your current insurance against your coverage needs

For example, if you become disabled, do you have disability insurance that would replace a sufficient portion of your income? For a sufficient period of time? Would the insurance reimburse your home care expenses or allow you to hire someone to take care of your kids? Do you have an emergency fund or other savings to pay for private health care, if needed, or other expenses? If you were to suffer a critical illness, would you need critical illness insurance in order to retire earlier or enable a caregiver to stop working temporarily in order to look after you? Could you stop working temporarily to take care a sick child?

Check what is covered by your group insurance, if you have any.

Warning

Be careful! A critical illness insurance contract can complement disability insurance but does not replace it.

End of the warning

Determine how long you will keep the insurance

Critical illness insurance can be for a limited period of time (term) or a lifetime (whole life). The following table summarizes the key differences between term and permanent critical illness insurance.

Features	Term critical illness insurance	Permanent critical illness insurance
Premium	The premiumA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200. The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. is reviewed periodically (e.g., at each renewal). It increases with your age.	The premium is fixed (leveled) for life or payable for a certain number of years, e.g., 10 years. At issuance, the premium will be higher than for term insurance.
Term of coverage	You are covered for the duration of the contract, e.g., 5 years.	For life.
Renewal	The contract can be renewable or non-renewable. If it is renewable, it generally terminates at a certain age (e.g., 75).	n/a
Convertible to another type of insurance	Some types of term critical illness insurance can be converted to long-term care insurance. Some contracts allow you to recover a portion or all of the premiums after a few years. This may terminate the contract. ^_{Ask how much the premiums would be for longer-term care insurance and what the possible benefits might be so you can better determine whether this conversion privilege is worthwhile for you.}	Some types of permanent critical illness insurance can be converted to long-term care insurance. Some contracts allow you to recover portion or all of the premiums after a few years. This may terminate the contract. ^_{Ask how much the premiums would be for longer-term care insurance and what the possible benefits might be so you can better determine whether this conversion privilege is worthwhile for you.}

Before choosing term critical illness insurance, check the price it will be renewed at each year through to the time you will no longer need it. Will the premiums be manageable for you through the entire term? Will you have to drop the insurance because the premiums will increase beyond your budget?

Select the illnesses you want to cover

Critical illness insurance pays out a lump sum following the diagnosis of a critical illness specified in the contract. You should therefore compare different contracts to see what illnesses are covered.

Before you purchase critical illness insurance, compare the illnesses specified in the contract against the following list. The insurance probably does not cover all these illnesses. The illnesses covered and the way they are defined vary from one contract to the next.

Principal illnesses that may be covered

Strokes (cerebrovascular accidents (CVAs), brain congestion)
Heart attack (myocardial infarction)
Life-threatening cancer
Aplastic anemia
Severe burns
Coma
Type 1 diabetes
Muscular dystrophy
Flesh-eating disease
E. coli bacterial infection
West Nile virus infection
Occupational HIV infection
Kidney failure
Vital organ transplantation
Alzheimer’s disease

Lyme disease
Parkinson’s disease
Motor neuron disease
Bacterial meningitis
Paralysis
Cerebral palsy
Loss of independent existence
Loss of speech
Loss of sight in both eyes
Loss of hearing in both ears
Loss of limbs
Coronary bypass surgery
Multiple sclerosis
Benign brain tumour
Organ transplant

Check the amount of insurance for each covered illness

Insurance amounts may vary base on illness or severity. Some health problems entitle insureds to only a fraction of the coverage.

Example

You purchase a $100,000 critical illness insurance policy. Two years later, you lose your speech. Assuming your contract offers you 35% of the insurance amount for this health problem, you will receive $35,000 (35% of $100,000).

Remember the illnesses that generate the greatest number of claims, like cancer and heart attacks. If a contract offers 35% of the insurance amount for a cancer diagnosis, will it cover your insurance needs?

Some insurers offer coverage that is tailored to children (i.e., for illnesses not included in adult coverage, such as cystic fibrosis and Down syndrome).

Check the exclusions

A number of situations are not covered by insurance. They’re called exclusions. One such exclusion is pre-existing conditions, which are illnesses for which there were no signs or symptoms prior to the contract being signed. The insurance may also exclude illnesses for which a physician was consulted before the contract was purchased.

Here are other examples of common exclusions:

Some illnesses (e.g., cancers) that occur within 90 days of the insurance coming into effect
Certain skin cancers
Illnesses resulting from alcohol or drug use
Illness resulting from an attempt to commit a criminal offence
Illnesses resulting from taking any drug other than as prescribed
Health problems caused by an intentionally self-inflicted injury or an attempt to take one’s own life
The consequences of refusing to follow the appropriate treatment based on the insured’s condition

Moratorium period – waiting period

For cancer, in particular, some insurers require the contract to be in effect for 90 days or more before the onset of symptoms or the first consultation with a physician before you can benefit from the coverage.

Check the other available insurance options

There are many options available and they vary from one insurer to the next. Comparing products requires you to pay close attention when reading the available information. You can speak with a representative if necessary. Here are a few options.

Conversion of the contract to long-term care insurance at a certain age, for example, 65. Some group critical illness insurance contracts can be converted to individual contracts, for example, when an employee leaves an employer. Carefully check the applicable conditions, including the cost and covered illnesses.

In the event of a covered critical illness, various services may be available, including:

Services of a psychologist
Services of a nurse to help you coordinate home care
Second medical opinion
Recovery assistance

Insight

Check the maximum number of authorized claims under the contract

Many contracts end once the insurance is paid out. Some contracts, however, permit several claims.

End of the insight

Compare premiums

PremiumsA premium, or insurance premium, is an amount that a person or company must pay on a regular basis to keep their insurance in effect. For example, if Mary has to pay $200 per year to keep her life insurance in effect, then the premium is $200.
The premium should not be confused with the face amount, or insured amount, which is the amount that the insurance company has to pay out. In the same example, if Mary has life insurance that pays $100,000 to Peter upon her death, then the face amount is $100,000. generally vary based on factors such as your health at the time you purchase the insurance, your age, your sex, and your smoker or non-smoker status.

Some insurance contracts require you to pay premiums throughout the term of the contract, while others require you to pay premiums only until age 65 or for a specified period of time (e.g., 10 or 20 years).

Premium return option

Some insurance contracts provide for the return premiums in certain circumstance, such as:

On survival at the end of the contract term

If you do not claim compensation at the end of a critical illness insurance contract term, your insurer may return the insurance premiums you’ve paid. After they are returned to you, you will no longer be insured under your critical illness insurance.

On death during the contract term

If you die without having received any benefits under your contract, some insurers will return the paid premiums to your heirs.

On death during the required survival period

If you die between the time the critical illness was diagnosed and the end of the survival period required to benefit from the insurance, some insurers will return the paid premiums to your heirs.