Recently Canadians have started turning to critical illness insurance to fill gaps in their existing health insurance coverage. They're concerned that if they get sick they won't be able to afford the staggering cost of prescriptions, rehabilitation and other out-of-pocket expenses; or have their spouse take time off work to care for them.

Critical illness insurance pays a lump sum upon diagnosis of an illness listed in the policy. The illnesses covered are different for each insurance company.

How Much Critical Illness Insurance do I Need?

If you're considering critical illness insurance there are many factors to consider, which we'll review below.

Common Critical Illnesses Covered

Common illnesses covered are as follows. Please note the list is not conclusive, there may be other illness covered, but aren't mentioned below:

• Stroke
• Heart Attack
• Cancer
• Alzheimer's
• Paralysis
• Multiple Sclerosis
• Blindness
• Organ Transplant
• Kidney Failure

As soon as a payment is made the policy is finished.

The type of critical illness insurance coverage varies depending on the degree of severity (treatable/untreatable) or conditions associated with the illness. With cancer, for example, if it's treatable your "down time" might be minimal so you could only be eligible for a partial claim.

Critical Insurance Payout

If you survive at least 30 days upon diagnosis of your illness, the insurance company will pay you a lump sum. How much your payout is and the amount of your premiums depends on:

• Length of coverage (policy term)
• The number of illness covered in your policy
• Extras you add such as a return of your premiums if you don't make a claim
• The benefit amount

Types of Critical Insurance Coverage - Basic and Enhanced

Basic: This type of policy covers between three and five illnesses that make up 85 per cent of claims. Some basic policies are simplified issue, so you don't need a medical. You only have to complete a questionnaire about your health, but all the answers must be “no.” These types of policies only cover about five major illnesses.

Advanced: This kind of policy requires a medical, and costs about 15 per cent more than basic coverage. However, it covers up to 26 or more illness.

Disability Insurance and Critical Illness Insurance Aren't the Same Thing

Each of these types of insurance aren't sufficient for both injuries and illness. Only about 25 per cent of disability claims are covered with a critical illness policy; and these are for back problems, neurological issues and mental disorders such as depression.

How Much Critical Insurance Should you Have?

It's a good idea to have enough critical illness coverage so your spouse can take a year off work. We suggest a year because you'll either recover or not during this time. When someone is diagnosed with a critical illness their ability to work is limited.

Additionally, their spouse's ability to work is limited because they're physically caring for them and driving them to and from doctor appointments/treatment, and this can add up.

Gas and parking costs add up quickly. If you live outside a major city it could cost up to $25,000 just to cover travel expenses and accommodation.

How Much Does Critical Insurance Cost?

A $50,000 simplified issue policy would cost a non-smoking 35-year old male $17.50/month ($25,000 coverage would only cost $8.75/month in premiums). This premium rate would increase every five years; and the policy would cover five main illnesses.

A $50,000 advanced policy would cost $21.50/month – this is a 10-year guaranteed rate and would increase every 10-years (not five years like the basic policy). Up to 26 critical illnesses are covered. To lock-in your premiums for 20-years it would cost $30.00/month, and coverage to age 65-years would only cost $35.00/month.

Critical illness is a policy you should strongly consider.

Money Saving Tip

If you want $25,000 critical illness coverage, you should consider a simplified issue policy (provided you haven't had a critical illness in the last 10 years). If you want a larger amount you should get an enhanced policy (provided that you and your family, parents and siblings are in good health).

Critical illness insurance complements life insurance as a living benefit and fills the gap with healthcare insurance; and becomes a full-circle of financial relief in the event of a critical illness.

To find out more about your options, speak with one of our specialized insurance brokers at InsurEye.

Author's Bio: 

I'm a passionate writer, who is deeply involved with financial and medical topics.