Peter Boys, Boys Financial Services

Is Critical Illness Insurance Really Necessary?


For those lucky employees that enjoy a “Health Spending Account” through work, it’s reassuring to know that your needs will be met (at least partially) in case of an unanticipated health issue.  Because let’s face it, few Canadians have critical illness coverage and if asked, they tend to reiterate the mantra, “Is critical illness insurance really necessary?”

The Toronto Star pointed out that, “If you ask the average person on the street about this type of insurance, a lot of people wouldn’t be aware of it,” and according to one expert,

“The chance of a 40-year-old having a heart attack or getting cancer before age 65 is four times higher than the possibility of he or she dying before 65.”

With these kinds of averages, it’s surprising to see that it’s not more of a priority to ensure that bills and income loss aren’t part of the stress of being incapacitated.

Prioritizing The Important Things

To put things into perspective, on a scale of 1 to 5 (1= not concerned; 5= very concerned), how would the following risks impact your life, and are you prepared for them?

  • Your car is stolen
  • Your house is broken into
  • You become ill out-of-country
  • Personal items are lost, broken, or stolen
  • You’re diagnosed with cancer

 The Reality of NOT Being Prepared

Statistics show that many Canadians are living paycheck to paycheck and enjoying an unprecedented amount of debt. The reality is that life is full of unanticipated events BUT, they can be much easier to get through with a little foresight and preparation.  The last thing anyone needs to worry about is how to cope with additional financial burdens on top of the stress of day-to-day health issues.

This is why you want to investigate your options.

The CAVEAT of Thinking Mortgage Insurance From Your Bank Is Sufficient

Probably the primary consideration for seeking DI coverage is to ensure that the bills continue to get paid, with mortgage payments leading the list.  However, before you agree to purchase coverage through your bank, we recommend that you read about CBC’s investigation of the mortgage insurance game.

When it comes to purchasing mortgage insurance, it’s important to know your options between obtaining insurance through a bank, versus owning your own individual policy.  Consider these questions:

Who owns the policy?

Most lenders are the owner and beneficiary of the policy that you pay premiums for and THEY receive the cash benefit when a claim is made (not you). The benefit is used only to pay off the mortgage regardless of other needs.

If you own a personal policy, benefits are payable to YOU to use as you choose.

Are you covered for conditions like Alzheimer’s, Parkinson’s and Multiple sclerosis?

Most lenders provide basic coverage for cancer, heart attack and stroke. Synergy provides protection for 22 conditions.

What is the amount of coverage?

Banks only sell enough insurance to cover the mortgage.  As your mortgage amount decreases, so does your benefit. With Synergy, you have access to a pool of benefits up to $500,000 and, since the policy is not tied to your mortgage, the benefit amount doesn’t change and can be used in whatever payout schedule is most convenient for you.

What happens to my coverage if I switch lenders?

Most bank-initiated policies are attached to the lender so, if you transfer your mortgage to another bank, your insurance is automatically cancelled.

Plus, if you experience any changes to your health, it may be difficult to get new coverage. When you own your own policy, you don’t have to re-apply for any reason. .

Can I continue my insurance coverage beyond my mortgage period?

Mortgage insurance provided by most lenders terminates when your mortgage is paid off.  With an individually-owned plan, your coverage is not affected by your mortgage and stays in effect for the life of the contract, until you terminate the coverage or until a benefit is paid.

Additionally, when you pay off your mortgage you have nothing to show for the years of premiums that you paid.  In contrast, a personally-owned policy is an asset with a significant monetary value at the end of the contract AND offers the option to extend coverage or convert it into a permanent life insurance policy.

Is my coverage guaranteed?

Most lenders reserve the right to cancel your policy at any time.  And, as you’ll discover from reading about CBC’s investigation into the “mortgage insurance game,” some lenders outright deny claims on technicalities, giving a homeowner no recourse at a time when financial worries should be the last thing on their mind.  With Synergy, your premiums and benefits are guaranteed for the life of your contract.


At the end of the day…

If you were unable to work for a prolonged period of time, how would you pay the bills?  Wouldn’t you like to enjoy the peace of mind that insurance can offer and focus on what really matters, like getting better?

With a little planning from an unbiased advisor, you can protect yourself and your family from financial worries that could otherwise be avoided.
Image licensed through Shutterstock