Key person coverage
The corporation owns and pays for a policy on an owner or key employee, and receives the benefit to cover lost revenue or hiring while they recover.
Critical Illness Insurance
Critical Illness Insurance, Explained Clearly
A lump-sum payment if you're diagnosed with a covered serious illness, such as a life-threatening cancer, heart attack or stroke. You decide how to use it: treatment, the mortgage, or time off to recover.
What It Is
Money while you're alive, when you need it most
Critical illness insurance pays a one-time, lump-sum benefit if you're diagnosed with a condition covered by your policy and survive the waiting period, usually 30 days. Paid to you on a personally owned policy, the benefit is generally not taxable.
There are no rules on how you spend it. People use it to replace income while they recover, cover treatment or travel costs that provincial health care doesn't, pay down the mortgage, or let a spouse take time off work.
Most claims come from three conditions: life-threatening cancer, heart attack and stroke. Many policies cover 25 or more conditions in total, and some pay a partial benefit for certain early-stage diagnoses. The exact list and definitions differ by insurer, which is why we compare policies from several Canadian insurers before you choose.
At a glance
- Lump-sum benefitPaid once, on diagnosis of a covered condition
- Generally not taxableOn a policy you own personally
- Your money, your choiceNo restrictions on how it's used
- Term or lifetime coverage10 or 20 years, to age 75, or for life
- Waiting periods applyA survival period, and a 90-day period for cancer
How It Compares
Life, critical illness and disability insurance
Three kinds of coverage for three different risks. Many families and owners need more than one.
| Life insurance | Critical illness | Disability | |
|---|---|---|---|
| Pays when | You die | You're diagnosed with a covered condition and survive the waiting period | Illness or injury keeps you from working |
| How it pays | Lump sum to your beneficiaries | Lump sum to you | Monthly income, after a waiting period |
| Typical use | Mortgage, family income, estate tax | Recovery costs, income gap, debts | Ongoing living expenses |
| Through work | Often one or two times salary | Rarely included | Often included, with limits |
Life Insurance With Critical Illness
Combining critical illness with life insurance
Many people shopping for life insurance also want critical illness coverage. There are two common ways to hold both.
- Separate policiesEach pays on its own claim, so a critical illness payment doesn't reduce your life coverage
- A rider on a life policyOffered by some insurers. Often simpler, but check what happens to the life coverage after a claim
We'll quote both ways, across several insurers, so you can see the difference in cost and coverage. See our life insurance page for term, permanent and coverage after 60.
What Drives the Cost
Pricing critical illness coverage
Age and health
Your age when you apply, your medical history and, often, your family history of cancer, heart disease and stroke.
Smoking
Nicotine use generally means smoker rates, which are considerably higher.
Amount and term
Larger benefits and longer coverage cost more. Lifetime coverage costs the most.
Return of premium
An option on some policies that refunds premiums under set conditions if you never claim. It adds to the cost.
For Business Owners
Critical illness coverage through your corporation
A serious illness can hit a small business as hard as it hits a family. These structures are reviewed with your accountant before anything is put in place.
Buy-sell funding
Gives partners the money to carry out a shareholder agreement if an owner becomes critically ill and wants or needs to step back.
Split-dollar critical illness
The corporation pays for the coverage and the owner personally pays for a return-of-premium option. The split must be set up carefully to avoid a taxable shareholder benefit.
Common Questions
Questions about critical illness insurance
On a policy you own personally and pay for with your own money, the benefit is generally not taxable. Corporate-owned policies and split-dollar arrangements have their own tax considerations, which your accountant should review.
A common starting point is enough to cover one to two years of household expenses, plus any costs you'd expect during treatment and recovery. We'll work through the number with you during a short call.
They do different jobs. Disability insurance replaces part of your income if you can't work, usually after a waiting period. Critical illness pays a lump sum on diagnosis, even if you keep working. Many people have both.
Most policies require you to survive a short period after diagnosis, often 30 days. Cancer usually has a 90-day exclusion period from when the policy starts, and pre-existing conditions may be excluded. We go through the specific terms before you apply.
Yes, for key person coverage, buy-sell funding or a split-dollar arrangement. Who owns the policy, who pays and who receives the benefit all affect the tax treatment, so your accountant reviews the structure first.
We meet clients at their office or business, by video, or by phone across Burlington, Oakville, Milton, Mississauga and Hamilton. Many first conversations start with a call to 289.339.8100.
Related Guides
Strategies that often work together
Life Insurance
Term, permanent and critical illness coverage, what drives the price, and options after 60.
Read the guideCorporate-Owned Life Insurance
Permanent coverage owned by the corporation, with tax-sheltered growth and CDA planning.
Read the guideGroup Benefits
Group health, dental and pension plans for small and growing businesses.
Read the guideThis information is general in nature and is not tax, legal, accounting, insurance or investment advice. It is based on current Canadian tax legislation, which can change. Any strategy should be designed and reviewed with your accountant and legal advisors based on your circumstances. Covered conditions, definitions, waiting periods and exclusions vary by insurer and policy; the policy contract governs.
Critical illness insurance in Burlington, Oakville, Milton, Mississauga and Hamilton
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