Critical Illness Insurance Vs Disability Insurance in 2024

Critical illness and disability insurance both offer financial protection, but they cater to different needs. Understanding their key differences can help you choose the right coverage for your situation.

Find out how critical illness insurance (CII) differs from disability insurance, what they cover, and what they don’t cover. Also, get an idea of their respective costs to make an informed decision.

You can also use our free comparator to explore the best critical illness and disability insurance plans, compare them, and get free quotes.

What is critical illness insurance?

Critical illness insurance, also known as critical illness cover or a dread disease policy, is a type of insurance that provides a lump sum payment if you are diagnosed with one of a specified list of critical illnesses. 

So, is critical illness insurance worth it? Absolutely! Because you can use the lump sum payment from your policy for any purpose, such as:

• Paying for medical bills and treatment costs
• Replacing lost income
• Covering the cost of long-term care
• Providing financial security for your family
• Helping to fulfill financial commitments

Before choosing any critical insurance plan, you should compare prices from different vendors. It will help you get the best deal. You can use our comparator to get personalized insurance quotes from leading Canadian companies.

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What is disability insurance?

Disability insurance coverage offers financial protection when you become unable to work due to an accident, illness, or disability.

Disability insurance provides a portion of your regular income (typically 40-60%) while you're unable to work. This helps you maintain your financial stability and cover essential expenses like housing, food, and transportation.

There are two types of disability insurance:

1. Short-term disability insurance (STD): Typically covers you for a few months (up to 2 years) while you recover from an injury or illness.
2. Long-term disability insurance (LTD): Designed for more serious disabilities that prevent you from working for many years or even permanently. It can provide income for several years or until retirement age.

What does critical illness insurance cover?

A policy from a private provider like Sun Life critical illness insurance or iA financial critical illness insurance typically covers a lump sum payment if you are diagnosed with one of a specific list of critical illnesses. 

These illnesses can vary depending on the policy but often include:

What does critical illness insurance not cover?

While critical illness insurance provides valuable financial protection against specific serious illnesses, it's crucial to understand what it does not cover.

Here are some of the most common exclusions:

• Pre-existing conditions: Most policies won't cover illnesses diagnosed before you purchase the policy. However, some insurers offer riders to cover pre-existing conditions after a certain waiting period.
• Non-listed illnesses: The policy only covers the specific illnesses listed in the contract. Any illness not explicitly listed is excluded from coverage.
• Routine medical expenses: Critical illness insurance focuses on major illnesses and pays out a lump sum upon diagnosis. It does not cover routine medical expenses like checkups, vaccinations, or ongoing treatments for chronic conditions.
• Mental health conditions: While some policies cover specific mental health diagnoses, many have limitations or exclusions. Coverage for mental health can vary significantly depending on the provider and plan.
• Complications from other illnesses: If the critical illness results from a pre-existing condition or another covered illness, the policy might not pay out.
• Suicide and self-inflicted injuries: Critical illness insurance typically doesn't cover disabilities caused by self-inflicted harm or suicide attempts.
• Participation in risky activities: Engaging in hazardous activities like skydiving or mountain climbing might void your coverage for illnesses related to such activities.
• Pregnancy and childbirth: Complications arising from pregnancy and childbirth are usually excluded from critical illness coverage.

What does disability insurance cover?

Disability insurance covers a portion of your regular income if you become unable to work due to a covered disability.

Most policies cover disabilities caused by accidents and illnesses, including:

• Physical injuries
• Mental health conditions
• Chronic illnesses
• Cancer
• Heart disease
• Stroke

Some policies may offer additional benefits, such as:

• Rehabilitation benefits to help you return to work after a disability.
• Survivor benefits to provide financial support to your family if you die.
• Waiver of premium if you become disabled.

Use our free comparator below to explore the best disability insurance plans, compare their coverage, and get personalized quotes in no time.

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What are the exclusions of disability insurance?

Disability insurance exclusions are events or situations that insurance companies will not cover under a disability insurance policy.

Here are some common exclusions of disability insurance coverage:

• Pre-existing conditions
• Self-inflicted injuries
• War or acts of war
• High-risk activities
• Mental and nervous disorders
• Substance abuse
• And more (based on specific policy)

What’s the cost of critical illness insurance and disability insurance?

The cost of critical illness insurance in Canada depends on various factors, including age and gender — we will discuss all the factors in detail shortly.

Here's a general range of monthly premiums for critical illness insurance in Canada:

• Age 30: $50 - $150
• Age 40: $75 - $200
• Age 50: $150 - $350
• Age 60: $300 - $500

Here's a general range of monthly premiums for disability insurance in Canada:

• Short-term: $50 - $200
• Long-term: $100 - $500

These are just estimates, and actual costs may vary significantly depending on individual circumstances. Use our comparator and compare quotes from different insurers to find the best rate.

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Which factors can affect the cost of insurance?

The cost of critical illness and disability insurance is influenced by several factors, some common to both and some specific to each type of insurance.

Factors affecting both critical illness and disability insurance:

1. Age: Premiums generally increase with age as the risk of illness or disability increases.
2. Gender: Women may pay slightly higher premiums than men for critical illness insurance due to their higher life expectancy.
3. Health: Pre-existing conditions can significantly increase premiums or even lead to denial of coverage. Smoking and other unhealthy habits may also lead to higher premiums.
4. Occupation: High-risk occupations generally face higher premiums for both types of insurance.
5. Amount of coverage: The higher the coverage amount you choose, the higher your premium will be.
6. Benefit period: A longer benefit period for disability insurance will result in a higher premium.

CII cost-affecting factors:

1. List of covered illnesses: The more illnesses covered by the policy, the higher the premium.
2. Waiting period: Policies with a shorter waiting period before benefits are paid will have higher premiums.
3. Riders: Adding riders for additional coverage, such as pre-existing conditions, will increase the premium.

Factors specific to disability insurance:

1. Definition of disability: Policies with a broader definition of disability, meaning they cover more conditions, will have higher premiums.
2. Elimination period: A longer elimination period before benefits are paid will result in a lower premium.
3. Benefit type: Short-term disability insurance is typically cheaper than long-term disability insurance.
4. Additional benefits: Policies with additional benefits, such as rehabilitation or survivor benefits, will have higher premiums.

What is the difference between critical illness and disability insurance?

Critical illness insurance and disability insurance are both important types of insurance that can provide financial protection in difficult times, but they have some key differences.

Here’s how they differ from each other:

Triggering event

• Critical illness insurance: Pays out a lump sum if you are diagnosed with one of a specific list of critical illnesses, such as cancer, heart attack, or stroke.
• Disability insurance: Replaces a portion of your income if you are unable to work due to an accident, illness, or disability, regardless of the specific diagnosis.

Benefit type

• Critical illness insurance: Provides a lump sum payment that can be used for any purpose, such as paying for medical bills, replacing lost income, or covering the cost of long-term care.
• Disability insurance: Pays out a monthly benefit that is typically a percentage of your pre-disability income, helping to cover your living expenses while you are unable to work.

Benefit duration

• Critical illness insurance: Typically pays out a single lump sum payment.
• Disability insurance: Can provide benefits for a short period (e.g., 2 years) or a long period (e.g., until retirement).

Cost

• Critical illness insurance: Premiums are typically based on your age, gender, health, and the amount of coverage you choose.
• Disability insurance: Premiums are typically based on your occupation, income, and the type of coverage you choose.

Here is a quick summary of the key differences:

Feature	Critical Illness Insurance	Disability Insurance
Triggering event	Diagnosis of a specific illness	Inability to work due to accident, illness, or disability
Benefit type	Lump sum payment	Monthly income replacement
Benefit duration	Single payment	Short-term or long-term
Cost	Based on occupation, income, and coverage type	Based on occupation, income and coverage type

Should I get critical illness insurance or disability insurance?

Both critical illness insurance and disability insurance offer valuable financial protection, but they address different needs.

• Critical illness insurance provides a lump sum payment, focuses on specific illnesses, doesn’t offer guaranteed benefits, and may be cheaper.
• While disability insurance provides monthly income replacement, broader coverage, and guaranteed benefits. It may be more expensive though. 

Here are some factors to consider when choosing between the two:

1. Your age and health: Younger and healthier individuals may find critical illness insurance more affordable.
2. Your occupation: High-risk occupations may benefit more from disability insurance.
3. Your financial dependents: If you have dependents who rely on your income, disability insurance is crucial.
4. Your existing coverage: Consider any existing coverage you have through your employer or other sources.

Ultimately, the best choice depends on your circumstances. Consulting with a financial advisor can help you assess your needs, risks, and budget to make an informed decision.