Page 54 - A Canuck's Guide to Financial Literacy 2020

54

Critical Illness

Critical illness insurance is a form of health insurance that provides a lump sum amount
against illnesses such as heart attack, stroke and cancer. Heart disease, stroke and cancer
are one of the most common health issues that individuals might face. According to Cancer
Society, 1 out of every 2 Canadians will be diagnosed with cancer during their
lifetime. Medical advancements have improved overall life expectancy and health but you
never know when the worst could happen. It's important to be covered!

Policy Overview

Critical Illness (CI) insurance will pay a one-time tax-free benefit to the life insured, provided
that they survive the minimum waiting period. The minimum waiting period can vary but it is
usually 30 to 90 days after diagnosis. This 30-90 waiting period can be referred to as the
"elimination period". Most policies require that once an individual is diagnosed with a critical
illness, they must survive for a specific period of time.

Policy Terms

The term of critical illness insurance can be written as renewable term or permanent term.
Renewable terms are reset every 10 years, guaranteed renewable to age 65, 70 or 75. A
renewable term policy may have a feature that allows the policy holder to convert it to a
permanent term insurance, depending on age. Permanent terms are usually set up as term-
75 or term-100.

Applying for Critical Illness

When applying for a Critical Illness policy, the insurance company would evaluate your
health using a questionnaire. This questionnaire will put emphasis on your family's health
history as well as your own.

Benefit Amount

The benefit of critical illness insurance varies. It could be as small as $10,000 to over
$1,000,000. This benefit would be paid out to the policy holder tax free and it's paid only
once. Policy is lapsed once the benefit is paid. This amount received can be used at the
policy holder's discretion.