Insurance is a very important part of financial planning, it is located at the bottom of the financial pyramid without proper insurance your financial plan will be very fragile.

We are overwhelmed with the different types of insurance products that are available and add to that the variation to each product, all this makes it almost impossible for anyone to understand the insurance products and perhaps that is why too many families go on without protection.

Life Insurance, Disability Insurance, Health Insurance, Dental Insurance, Credit card Fraud insurance, Car Insurance, Home Insurance, Critical Illness Insurance, Identity theft Insurance, Credit Insurance…..and the list goes on

A fairly new type of insurance is Critical Illness Insurance (CI), I personally believe Critical Illness Insurance is one of the more important type of protection to need.

Critical Illness Basics

Critical Illness insurance and Life Insurance are different in the purpose each serves. Critical Illness falls in the category known as a living benefits since the survivor gets the payout.

Similar to Life Insurance, Critical Illness policy pays a lump sum in case of the insured event; a critical illness. Each policy has a list of illnesses it covers these lists differ from insurer to insurer but almost all of them have the top three illnesses; heart attack, stroke and cancer. Like Life Insurance, the payments are tax-free and can be used for anything you wish. It could be used to get medical help overseas or use it to pay down debt, go on a trip take time of work to recover etc. There are no restrictions as to how to use the funds and no receipts are needed to get the funds.

Dr. Marius Bernard

Unlike many other products, Critical Illness insurance was developed by surgeon Dr. Marius Bernard, here is a video of him discussing the idea, Dr Marius Bernard Critical Illness Video.

Why is Critical Insurance Important?heart-attack

Statistically speaking out of any insurance policy you would buy, Critical Illness is the one you are most likely to claim on. The chances of a Canadian suffering from a critical illness are 1 in 3! Statistics show that chances suffering from cancer, heart attack and stroke are very high and chances of survival have been consistently increasing. Those who do not survive the illness will hopefully have life insurance to take care of their families, but those who survive could potentially face severe financial hardship.

The treatment they need might not be available in their province or country, waiting times maybe too long where in US they could get the treatment faster, they may not be able to work for long period of time and fall behind on bills. There is enough emotional stress when one goes through a critical illness, having CI can help offset some of the financial stress and help focus on recovery.

Critical Illness Insurance Underwriting

Understandably the underwriting requirements for Critical Illness Insurance are somewhat stricter than for life insurance. If you have an immediate family member who has suffered a critical illness it will be harder to get insurance, often you will have exclusions or premium increases, if you have two immediate family members who suffered from a critical illness your chances are even lower to get coverage.

How much does CI cost?

Since the chances of claiming on a CI policy is higher than life insurance the cost of having a policy is also higher, however many insurance companies now have a Return Of Premium (ROP) feature available. In simple terms if you reach a certain age (usually 65 or 75) and do not make a claim you will receive all your premiums back without any interest and tax free. You will be paying an extra premium for this feature however many believe it’s generally worth it.

Life and Critical Illness combined

Many companies now also offer a combination of life and Critical Illness insurance. In this type of policy you would select a value for your life insurance and then select a percentage of that as an advance in case of critical illness.


$100,000 Life & CI combo plan, you select $50,000 as CI advance. If you suffer a critical illness and make a claim you would get $50,000 without any survival period, and you would have $50,000 remaining as death benefit when you die your beneficiary will get the $50,000. If you do not make a CI claim your beneficiary will get the full $100,000.

This type of plan is becoming more popular as the cost is much lower than two individual policies.

This is just a basic overview of Critical Insurance, I encourage everyone to at least take a look at CI and speak with an Insurance advisor about the amount of coverage you would need. If you have other questions about this type of insurance please leave a comment and I will try to answer them for you, or you can contact me.



Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.