Pros and Cons of Critical Ilness Insurance Coverage


Critical illness insurance is a relatively new type of policy that is often misunderstood. Today we are going to clarify what it is and what it covers.

How does critical illness insurance work?

Critical illness is similar to term life insurance, except that it is paid when you are diagnosed with a disease covered by the policy, rather than paid upon death. However, some people confuse this type of insurance with disability insurance, which replaces your earnings if you become disabled.

Health insurance, like term life insurance, is paid as a lump sum, if you are diagnosed with a predefined disease such as cancer. You decide how this amount will be spent – some people put it in additional medical treatment (especially if there are treatment methods that are not covered by provincial health care), others decide to take time off from work to spend with family or travel.

As with many insurance products, this type of insurance plan comes with an extensive process of submitting, applying for, and purchasing insurance that is included in the price. insurer analyzes before you can get a policy; and like any insurance policy, a critical illness policy has both pros and cons.

Let's take a closer look at the pros and cons of this type of insurance.

Benefits of Critical Illness Insurance

There are several positive aspects:

  1. Funds that can help when needed: The lump sum you receive if you are diagnosed with a serious illness will allow you to get better treatment and hopefully full recovery in some cases. You can also spend these funds on other needs or projects (such as travel or removing items from your wishlist).
  2. Protection of your own business: If you have your own business, you may need to work part-time, after being diagnosed with a serious illness (reduced work hours are common when extensive medical treatment is needed). It fills the financial gap created by your reduced hours in your business. With the funds, you could hire someone to help you with your business.
  3. Stackable protection: Unlike disability insurance, critical illness coverage is 'stackable'. With disability insurance, coverage is limited because it is based on your income, and you cannot exceed that limit even if you have multiple disability policies. You can, however, have multiple policies with varying amounts of coverage for different illnesses. If you have, for example, two policies with benefits of $ 250,000 and $ 300,000, you can get a payout of $ 550,000 when you make a claim.

Disadvantages of Critical Illness Insurance

  1. Expensive: This type of insurance policy is not cheap. As an example, a 10 term insurance policy with $ 500,000 coverage (clause 10 means a policy that covers you for 10 years) for a 35 year old non-smoking male with no preconditions costs around $ 180 / month (exemplary quote) whereas a 10 term life insurance policy with $ 1,000,000 coverage for the same person costs around $ 50.
  2. Definitions matter: If a diagnosed condition, such as a heart attack, does not meet the definition of that condition in the policy, your claim may not be paid.
  3. Does not cover you immediately: The policy usually comes with a waiting period (eg 90 days) during which you are not covered.
  4. Payment is not immediate: If you are diagnosed with a serious illness, there is a "survival period" – (for example, 30 days). If you die within this time, your claim will not be paid.


Critical illness insurance offers solid coverage in the event of an unexpected diagnosis of critical illness, but this coverage comes at a cost. It is a good idea to work with an insurance broker to get a critical illness insurance quote and apply for the policy. Brokers have access to multiple insurance companies and will help you navigate the complex application process, especially if you have pre-medical conditions.

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