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Do I need disability insurance if I have critical illness insurance?

by Mark Cluett
5 min read

Disability-inducing injuries and critical illnesses are easy to mix up; they have much in common. Both can impact your ability to earn a paycheque but in considerably different ways. Because one can be so easily conflated with the other, people sometimes assume if they are covered for one (either disability or critical illness insurance), then they must be covered for both. 

Unfortunately, this is incorrect. While based on the same principles, disability insurance and critical illness insurance work in very different ways and provide benefits that are distinctly unique from one another. While the Canadian healthcare system is robust and acts as a significant safety net for the immediate treatment of our possible illnesses and injuries, we often need more than just medicine. If you are unable to work due to circumstances like those described above, you may want to take a closer look at the differences between the two.

What is critical illness insurance and what can it cover?

Critical illness insurance is an insurance policy that pays you a tax-free, lump sum if you develop a specified illness, health event or undergo treatment for those two situations during your agreed-upon coverage period. The coverage package can include any or all of the more than 26 critical illnesses or from cancer (and all its forms), aplastic anemia, blindness, kidney failure, heart attack, and more that are all covered here in detail

Critical illness insurance acts similarly to life insurance in that you can use the benefit amount however you see fit, regardless of whether it’s directly related to your critical illness. That can include further treatment of your illness, rehabilitation and recovery costs, income replacement for the time you may need to take off, house cleaning, or even a giftbasket for your neighbours if they watered the plants while you were in the hospital – the choice is yours.

And, while not all critical illnesses have a high mortality rate, as a whole they are still quite common in Canada. This type of insurance gives you the financial independence to make decisions that are best for your recovery, family, or capitalizing on the time you have left.

To learn more about its finer details, read our full honest guide.

Book some time with our advisors or call them at 1-888-601-9980

What is disability insurance and what can it cover?

Disability insurance is meant to replace a substantial portion of your income should you become injured or ill and it affects your ability to work. It provides you with consistent monthly payments while you recover from your ailment or until your pre-determined coverage period ends – whichever comes earlier.

Like critical illness insurance, you can use the benefit on whatever you see fit, but the monthly payment structure is meant to mimic your paycheque, and typically intended to cover your mortgage or rent, and other living expenses while you are on the road to recovery.

There are several variables and types of disability insurance, which you can learn about here, but these are its main differentiating factors versus critical illness insurance.

How is disability insurance different from critical illness insurance?

Disability insurance and critical illness insurance are types of living benefit insurance; they allow an insured person to receive financial protection in the event of certain unique circumstances. The insurance benefit payment in the case of disability insurance and critical illness insurance, unlike life insurance, is received by the policy holder themselves rather than payments being made to dependents or family members – as is the case with life insurance. 

There are however some unique differences between the two which are highlighted below:

Disability InsuranceCritical Illness Insurance
Claim event(s) Any illness or injury that leads to a loss of incomeDiagnosis of a pre-specified life-threatening illness or condition (severe disability may be included)
Coverage amount Replaces a portion of your monthly incomeNot linked with your income, payment is determined by policy you select
Payment frequency Monthly benefit paymentsOne or more lump-sum payment(s)
Coverage term Most policies lapse at age 65Coverage can be obtained up to age 100
Return to work Benefits cease upon resuming work (although partial benefits may be available)Payout continues regardless of whether insured is working or not

Do I need disability insurance if I have critical illness insurance?

The answer to this (and vice versa) is not so simple and depends on your needs and age among other factors. They are two distinct protection products addressing different situations. Both these protection products are important for Canadians that rely on their employment earnings to support their family, meet their ongoing expenses and pay off their mortgage or other liabilities. The policies complement each other quite well.

Honest guide to disability insurance

An Honest Guide To Disability Insurance

Honest guide to critical illness insurance

An Honest Guide To Critical Illness Insurance

Do I need disability insurance if I'm covered through work?

Do I Need Disability Insurance If I’m Covered Through Work?

Where do I go for insurance advice?

You don’t have to go far. Our licensed advisors are happy to answer all your questions on the details of critical illness insurance versus disability insurance. We also have calculators for both critical illness insurance and disability insurance to give you a better idea of how much coverage you might need and how much it can cost. It’s better to plan ahead than to be caught unprepared and unprotected. Call 1-888-601-9980 now or set up your appointment with us right here.

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