Critical Illness Insurance: Why Canadians Need It

Critical Illness Insurance: Why Canadians Need It


Critical Illness Insurance provides financial assistance when you or a family member on your Chamber of Commerce Group Insurance Plan becomes critically sick or ill and unable to work or provide financial means to support their family. 

Although the government health plan may cover some of your treatment costs, Critical Illness Insurance helps cover the financial burdens of not being able to work and may provide additional medical coverage. 

One thing is clear: You can’t plan when to get sick, but you can make plans for when you do. 

Let’s talk about this and its tax implications in detail below.

What is Critical Illness Insurance?

A Critical Illness Insurance pays for serious illnesses and medical emergencies like heart attack, kidney failure, cancer, and other life-threatening illnesses that are not covered by either a standard health insurance plan or Canada’s public health care system.  

Getting a Critical Illness Insurance on top of your basic health insurance means having a guarantee that if you’re ever diagnosed with a covered illness, your Critical Illness Insurance will pay you a lump sum of cash that you can use towards your treatment or use any way you want, including ensuring your business and your employees are protected while you’re focused on your health.

For a few dollars per month, it’s a small price to pay in exchange for that peace of mind.

If you want to learn more about why Critical Illness Insurance is important for employees and employers, how much is a Critical Illness insurance or how much is the lump sum payment, we recommend reading Understanding the Importance of Critical Illness Insurance for Employees and Employers.

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Is Critical Illness Insurance Worth It in Canada?

Thinking that cancer or a stroke won’t happen to you so you’ll never have a need for Critical Illness Insurance is a dangerous mentality. Like a car accident, you don’t know when or if critical illness will strike you.

Canadian Cancer Statistics shows that nearly 1 in 2 Canadians will develop cancer in their lifetime and nearly 1 in 4 are expected to die from it. 

Also, according to the Heart and Stroke Foundation of Canada, 9 in 10 Canadians have at least one risk factor for heart condition, stroke or vascular cognitive impairment. 

Multiple Sclerosis (MS), also considered as a critical illness, is also more common than what you might think. In fact, Canada has one of the highest rates of multiple sclerosis in the world. It is estimated that 1 in every 385 Canadians are living with the disease.

The reality is bleak and the truth is, the government will not cover all of your expenses. Keep in mind that expenses may extend to post-surgery care, lifestyle changes after a recovery, or worse, a relapse (reappearance of the disease) because that can happen. 

For instance, the rate of people re-admitted to hospitals for a second related event following a heart, stroke or cognitive condition is 40%

So in other words, Critical Illness Insurance is worth having in Canada. 

If you are young with plenty of other financial responsibilities that will be difficult to fulfill if you cannot work because of an illness, getting insurance that covers critical illnesses is financially wise—particularly if you’re the breadwinner.

Other statistics that shows the life altering effects of critical illness include:

  • 9 out of 10 Canadian families touched by cancer experience some form of financial challenge as incomes decline and household costs rise, as reported by the Canadian Cancer Society.
  • 31% reported a drop in earning power for people suffering a stroke, as shown in a study led by the University of Manitoba. 

For that reason, we believe that everyone should have Critical Illness Insurance to protect themselves and their families. 

How Does Critical Illness Insurance Protect You?

Generally, Critical Illness Insurance protects

  • your income from unexpected expenses
  • your savings set aside for retirement and the future
  • your mental health by being free from financial worries

As a business owner, the lump sum payment you’ll get may be used to

  • pay for business expenses to ensure smooth operations
  • finance succession planning strategy for your business 
  • cover costs of corporate asset management or maintenance

On top of all that, the payout is also tax-free! Let’s talk more about tax benefits and tax treatment of Critical Illness Insurance. 

Critical Illness Insurance Tax Treatment in Canada

In Canada, insurance benefits are generally not considered as income for tax purposes. So, since a Critical Illness Insurance payout is not treated as income, it will not be subject to income taxes.

Are Critical Illness Insurance Premiums Tax Deductible?

As a rule, you can’t claim tax deductions for premiums because they are considered as a personal expense. 

If the premium is paid for by an employer as part of a group insurance, the premium paid is deductible to the employer and is included in the employee’s income tax return as a taxable employment benefit (subject to tax deductions for the employer because it is a business expense). 

Canada’s Income Tax Act has specific rules for specific situations when it comes to insurance premiums. It’s best to talk to a tax professional if you think you have a unique situation.  

As an individual, you may still be eligible for a tax credit (direct tax cut from the total payable tax) if you use the payout for certain medical expenses as listed in the Income Tax Act.

Are Critical Illness Insurance Payouts Taxable?

Critical Illness Insurance payouts are not taxable because, again, the Canada Revenue Agency does not treat it as an income. 

So in summary, the premiums are not tax-deductible for an individual purchasing coverage, but the payouts are tax-free.

What Happens When You or Your Employees Don’t Get Critically Ill?

If the policy has a return of premium rider, you may get your money back after a certain period. If you choose this option, the Critical Illness Insurance will expire and you or your employees will no longer have coverage for critical illnesses in the future. 

Where to Buy Critical Illness Insurance

A serious illness could impact your earning power and your business, if any of your core employees develop one. It’s best to get Critical Illness Insurance as early as possible. Get in touch with BP Group Solutions or request for a quote if you’re considering buying one to protect your employees and your finances.

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