Critical Illness Insurance

In many cases, benefits paid from individually owned Critical Illness Insurance policies are received on a tax-free basis under current Canadian tax rules.

However, tax treatment can vary depending on how the policy is structured, who owns it, and who pays the premiums. Tax rules may also change over time. For clarity in your specific situation, professional tax advice is recommended.

Life insurance is designed to pay a benefit to your beneficiaries if you pass away, helping provide financial support to those you leave behind.

Critical Illness Insurance, by contrast, is designed to provide financial support while you are living, following the diagnosis of a covered condition and subject to the policy terms. The benefit is paid directly to you and can be used at your discretion.

Both types of insurance serve different planning purposes and may play complementary roles in an overall insurance strategy.

Requirements vary by insurer and policy.

Some applications involve answering health-related questions, while others may require additional medical information. The level of medical review can depend on factors such as age, the type of policy, and the amount of coverage requested.

In certain cases, simplified or guaranteed-issue options may be available, though these typically come with limitations compared to fully underwritten policies.

Some Critical Illness Insurance policies offer optional features that may return a portion or all of the premiums paid, provided certain conditions are met.

These features are not included in all policies, may increase the cost of coverage, and are subject to specific rules set by the insurer. Availability and terms vary by policy and insurer, so it’s important to review the details carefully before relying on this feature.

Critical Illness Insurance and Disability Insurance are designed to address different types of financial risk.

Critical Illness Insurance typically pays a one-time lump sum if you are diagnosed with a covered condition and meet the policy’s requirements. The funds can generally be used for any purpose, such as covering medical expenses, reducing debt, or taking time away from work.

Disability Insurance is designed to replace a portion of your income if an injury or illness prevents you from working. Benefits are usually paid monthly after a waiting period and continue only while you remain unable to work, subject to the terms of the policy.

Because they address different risks, these two types of insurance are often used together rather than as substitutes.