Critical Illness Insurance
What if you have cancer, heart attack or a stroke?
Get tax-free cash to use the way you want after you're diagnosed with a covered condition.
Leading critical illness insurance plans cover over 20 conditions. If you are diagnosed to get a tax-free benefit to use as you wish. If you don't have a claim, you can get your money back.
This video from Sun Life Financial gives a quick overview of critical illness insurance:
How would you use the money?
Here are some ways:
- pay your mortgage
- take time off work
- arrange for additional childcare
- travel to receive specialized treatment without waiting
- access whatever help you need
- cover expenses which provincial health plans exclude, such as
- life-saving drugs
- medical equipment
- home renovations to accommodate a wheelchair
How a 39 year old used his benefits after a heart attack in December 2017.
How likely is a critical illness?
The statistics are scary. You're more likely to survive what killed in the past. There can be a big effect on your finances though. You can self-insure by using money saved for retirement or by taking a loan against home equity. Maybe critical illness insurance is cheaper and provides more peace of mind.
What if you already have disability insurance?
Disability (or income replacement) insurance is for disability risk. Critical illness insurance is for morbidity risk. These risks are different, though there may be overlap. For example, if you have a critical illness like cancer, you may be unable to work and qualify for disability benefits too.
Some of both may be better than all of one — or none of either.
What if you already have long term care insurance?
Some critical illness plans overlap with long term care insurance. This may be a more cost effective solution than buying separate plans. Some critical illness plans can be converted to long term care insurance.
Taxation of benefits
The taxation of critical illness insurance benefits is not clear. Since the premiums are paid with after-tax dollars, the expectation is that benefits are tax-free. If owned corporately, the corporation likely receives the benefits tax-free. Unlike life insurance, there isn't a mechanism like the Capital Dividend Account to pay benefits out of the corporation tax-free. Here is more information:
- Corporate ownership of critical illness insurance (Sun Life, Aug 2017)
- Taxation of stand-alone critical illness insurance in the corporate context (Manulife, Aug 2016)
Do consult with your tax professional.