What is Critical Illness Insurance?
Critical illness insurance is a type of insurance that pays you a tax-free lump sum benefit if you are diagnosed with one of the illnesses covered by the policy. For example, the critical illness policy may cover life-threatening cancer, heart attack, or stroke. It could be an important part of your insurance portfolio.
Critical illness insurance is referred to as a living benefit. While a life insurance policy pays your beneficiary only after you have passed away, the critical illness benefit is paid to you when you suffer one of the covered critical illnesses. This coverage can help reduce the financial stress you could experience while recovering from a critical illness.
What are the benefits of a critical illness insurance plan?
The benefit of the plan is that it pays out a tax-free lump sum amount when you suffer a covered critical illness. You may use the lump sum coverage amount paid to you however you choose. For example, you can use the lump sum amount to help:
- Pay for treatment that may not be covered by your provincial health insurance, such as private nursing, physical therapy, or medical equipment.
- Supplement your lost income if you're unable to work and help pay for daily expenses such as childcare so you can focus on your recovery.
- Protect your retirement savings and other investments by not having to dip into them.
Like most mishaps in life, critical illnesses may occur without notice, and it's always a good idea to be financially prepared rather than deal with possible financial devastation. In situations like these, the adage "hope for the best but prepare for the worst" comes to mind.
So, what's the difference between critical illness and life insurance, as well as other insurance plans?
Great question. Let's compare some of their features.
It would be good to remember that everyone’s needs may not be the same when it comes to getting an insurance plan. So, it can be beneficial to speak to a licenced insurance agent to determine which insurance product or combination of products suits your needs.
Critical Illness Insurance vs Life Insurance
For the first comparison, we'll look at critical illness insurance compared with life insurance.
As a quick note, a life insurance policy is a contract between you and your insurer. The insurance company agrees to pay a specified amount to the person or people chosen as beneficiaries in the event of the insured person's death.
We'll discuss what these insurance plans cover, their benefits, and who is eligible for them.
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Critical Illness Insurance |
Life Insurance |
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Features
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What are the benefits?
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A payout might be received, which can help with financial needs such as medical expenses not covered by provincial healthcare and supplement lost income.
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As the benefit only pays out upon the insured person's death, it will not help cover ongoing medical recovery bills or replace lost income if the insured person survives the illness.
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Who is eligible?1
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With TD Insurance, your eligibility is based on your answers to our health questions, and you:
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With TD Insurance, your eligibility is based on your answers to our health questions, and you:
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Critical Illness Insurance vs. Disability Insurance
Now, we'll compare critical illness and disability insurance. You may have wondered if they are the same, as they do have some similarities.
In case you're wondering, generally, disability insurance is a type of coverage that will help replace a portion of your income if a disabling injury or illness prevents you from working in a covered occupation.
At TD Insurance, we offer TD Accident Disability Insurance, which provides a benefit ranging from $500 to $1,500 per month for up to 24 months if you become disabled as a result of an eligible accidental injury.
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Critical Illness |
Disability Insurance |
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Features
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Installments of payments to help replace lost income due to disability.
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What are the benefits?
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A payout might be received, which can help with financial needs such as medical expenses not covered by provincial healthcare and supplement lost income.
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This type of insurance could help replace some or all your income, depending on the plan you have.
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Who is eligible?1
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With TD Insurance, your eligibility is based on your answers to our health questions, and you:
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With TD Insurance, your eligibility is based on you:
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Critical Illness Insurance vs. Critical Accident Insurance
Lastly, let's look into the comparison between critical illness insurance and critical accident insurance, yet another pair of insurance types that are unique to one another.
A critical accident insurance plan may pay benefits that can be used to help with lifestyle changes and recovery expenses in the event of a critical accident that causes a covered loss.
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Critical Illness Insurance |
Critical Accident Insurance |
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Features
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A coverage amount is paid for the type of critical accident suffered. The amount paid could depend on the severity and type of the injury suffered.
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What are the benefits?
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The payout can help with medical bills, including paying for medical devices, helping with lost income, and help pay for cutting-edge treatments that aren't covered by provincial health care.
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You could receive a lump sum amount that can help supplement existing coverage you have (a health insurance plan, a provincial health plan or employee benefits).
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Who is eligible?1
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With TD Insurance, your eligibility is based on your answers to our health questions, and you:
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With TD Insurance, your eligibility is based on you:
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How does critical illness insurance work?
Critical illness insurance pays you a tax-free lump sum benefit if you are diagnosed with one of the illnesses covered by the policy. Insurance companies can have a varied list of critical illnesses for which a benefit will be paid out, so you should check with the insurer for details. The high out-of-pocket costs to get certain treatments (depending on the illness) can hinder other financial aspects of your life, like the payment of your mortgage, living expenses, and educational expenses that generally tend to tighten budgets.
There might be a chance one would require private nursing care to recuperate from a critical illness while also needing to schedule several sessions of physical therapy. Sometimes, special medical devices could also be suggested by the doctors to aid in the recovery process. Lastly, all of this might lead to spending on childcare as your focus shifts to your treatment, which might disrupt your children's routine.
The lump sum benefits this type of policy might give you can be used as required to help tackle the financial burdens caused by the illness.
As long as the conditions of the policy are met, one can submit a claim with the required documents and receive the benefit. It would be good to remember that this type of policy might have an initial waiting period depending on the illness until the coverage kicks in for most conditions.
Who is critical illness insurance for?
Critical Illness insurance is for someone who wishes to get financial protection in case they suffer a type of illness that is covered under this type of insurance. As an example, TD Insurance Critical Illness Recovery Plan provides coverage for a heart attack, life threatening cancer, and/or strokes.
When should one apply for a critical illness insurance plan?
There's no "perfect" time to get a critical illness insurance policy. Just like many other personal insurance policies, if you are young and healthy, you may pay a comparatively lower price for the insurance policy.
When does the critical illness coverage end?
If you are insured with a critical illness policy, your coverage would typically end once the benefit has been paid for a payable, diagnosed critical illness. Of course, non-payment of premiums could also lead to its lapse.
What are some exclusions you may see in a critical illness plan?
Since critical illness plans can vary by insurer, it is a good idea to read the policy document to understand the exact list of exclusions. Here are a few examples of exclusions you may come across:
- If the insured person dies within the first 30 days of the critical illness's diagnosis, the benefit will not be paid.
- If the insured person is diagnosed with cancer within 90 days of the effective date of the policy, the benefit will not be paid.
- Providing incorrect or false information to the insurer may void the plan, and the benefit will not be paid.
Critical Illness Insurance with TD Insurance
At TD Insurance, you can get the Critical Illness Recovery Plan with fixed premiums for 10 years and coverage ranging from $10,000 to $100,000.
Critical insurance coverage might be useful and give yourself and your family a chance to cope with financial burdens if you were to suffer a covered illness. For more details, please call 1-888-788-0839.
FAQs Related to Critical Illness Insurance
Is critical illness coverage better than life insurance?
They can't be compared, as they both serve unique purposes. Life insurance pays a death benefit to your beneficiary upon your death, and critical illness insurance pays a lump-sum benefit to you upon suffering a critical illness. With critical illness insurance, you can choose to use the benefit however you wish, such as to help pay medical bills.
How does critical illness insurance payout?
Generally, if you are diagnosed with a covered critical illness and survive the illness for a certain period of time (the waiting period varies with the type of illness and the insurer's policy) a one-time, lump sum will be paid out to you or the registered claimant.
1Different insurers can have different eligibility criteria. So, it is a good idea to check with your insurer for full details on eligibility.
TD Critical Illness Recovery Plan insurance is underwritten by TD Life Insurance Company. For defined terms, limitations, and exclusions, refer to the Insurance Policy for full details.
The content on this page is for general information purposes only and does not constitute legal, financial or insurance advice. Speak to an insurance advisor regarding your specific situation. The information contained herein, is subject to change without notice.