Critical Illness Insurance for Senior Citizens: How Much is it and What Should You Know?

Why is Critical Illness Insurance Important for Seniors?

Critical Illness Insurance for Senior Citizens

As we age, the likelihood of confronting a critical illness increases significantly, making senior citizens far more susceptible to serious health challenges than their younger counterparts. Compounding this vulnerability, many seniors find themselves ineligible for disability insurance due to the absence of regular employment or income at this stage in their lives.

This situation is further exacerbated by the urgent nature of their treatment needs; unlike younger individuals who may have the luxury of time on their side, seniors often face the pressing reality that makes immediate and possibly more advanced treatment options—such as those available in the United States or Europe—crucial.

Getting comprehensive coverage becomes not just a matter of safeguarding their health, but also a protective measure for their families and their hard-earned retirement savings. Ultimately, investing in adequate critical illness insurance coverage offers seniors invaluable peace of mind, knowing they are well prepared to tackle any health challenges that may arise without compromising their financial stability or burdening their loved ones.

Let’s dive in and learn more about critical illness insurance for seniors.

What is a Critical Illness Insurance Policy?

How does critical illness Insurance work?

Unlike Disability Insurance, Critical illness coverage offers a one-time payment that can be utilized at your discretion (for example, for treatment, home adjustments, or lifestyle alterations) following an official diagnosis of a covered illness and completion of the waiting period.

Are there any coverage limits for a critical illness insurance policy?

Normally, the coverage can extend up to $2,000,000 but might differ, either lower or higher, based on your income in specific instances.

Is critical illness insurance tax deductible?

There are two tax-related themes when it comes to a critical illness insurance policy: payment of policy premiums and claim payout if you are diagnosed with a critical covered by the policy.

For tax purposes, when you personally own a critical illness insurance policy, the premiums you pay are classified as a personal or living expense, meaning they cannot be deducted from your income tax. However, if this type of insurance policy is configured as part of an employee benefit package, the employer can deduct the premium payments as a salary expense.

Regarding the taxation of claim payouts, the lump sum benefits from critical illness insurance are not taxable in the following scenarios:

  • When the policy is owned on a personal basis
  • When the policy is personally owned but set up as part of an employee benefit plan.

Critical illness insurance – important to know

Typically, you have the option to select coverage for the three most common critical illnesses—heart attacks, cancer, and strokes, which constitute the majority of claims—or opt for a more comprehensive plan covering over 20 critical illnesses, such as Multiple Sclerosis, major organ transplants, loss of speech, and more.

Critical illness insurance, example

One day, Margaret, a retired librarian and grandmother of five, faces the heart-wrenching news of being diagnosed with early stage breast cancer. In Canada, where she resides, the waiting times for treatment can be extensive, making timely care for critical illnesses like hers a pressing concern, especially given her advanced age where every moment counts. Fortunately, Margaret had the foresight to secure critical illness insurance, tailored for seniors, recognizing the potential need for rapid access to treatments not readily available within the Canadian healthcare system.

Upon confirmation of her diagnosis, Margaret is relieved to discover that she is eligible for a lump sum payment from her insurer. This financial boon is a silver lining, enabling her to consider immediate treatment options beyond the Canadian border. With the insurance payout, Margaret has the resources to seek expedited, potentially lifesaving medical attention in the United States, sidestepping the lengthy wait times at home. This critical illness insurance proves to be not just a financial safeguard but a lifeline, offering Margaret the chance to focus squarely on her recovery and spend precious time with her loved ones without the added stress of financial strain or delayed treatment.

What Types of Critical Illness Insurance Exist?

When exploring critical illness insurance options, it’s crucial to understand the distinctions among standard policies and those categorized as simplified issue or guaranteed issue. These differences significantly impact eligibility, coverage, and the claims process, offering varying degrees of flexibility and convenience based on individual health conditions and the level of immediacy desired in policy activation.

Standard Critical Illness Insurance: Overview

Typically requires a comprehensive medical examination or health assessment as part of the application process. This scrutiny ensures that the insurer has a detailed understanding of the applicant’s health, thus tailoring the coverage to reflect the assessed risks accurately. Standard policies often provide a broader range of covered conditions and higher payout limits, reflecting the thorough vetting of applicants’ health. This option is suited for individuals who prefer extensive coverage and are willing to undergo the necessary medical evaluations to secure it.

No Medical Critical Illness Insurance, Simplified Issue: Overview

No Medical Critical Illness Insurance (Simplified Issue) Insurance streamlines the application process by eliminating the need for a medical exam. Instead, applicants answer a concise questionnaire covering basic health information. This simplified approach reduces the barrier to entry for coverage, making it an attractive option for those who might have minor health issues that could complicate or increase the cost of a standard policy. However, it’s important to note that while this type simplifies the process, it may come with limitations on the number of illnesses covered and possibly lower maximum payout amounts compared to standard policies. The streamlined questionnaire is designed to identify significant health risks without exhaustive scrutiny.

No Medical Critical Illness Insurance, Guaranteed Issue: Overview

No Medical Critical Illness Insurance (Guaranteed Issue) represents the highest level of accessibility in terms of application simplicity. This coverage requires no medical examination or health questionnaire, making it the go-to option for individuals with significant pre-existing conditions or those who have been denied coverage in the past. The trade off for this convenience and inclusivity is usually found in the form of more considerable restrictions, such as limited coverage for fewer critical illnesses, lower payout caps, and specific clauses like waiting periods before a claim can be made. Additionally, some policies may exclude certain critical illnesses altogether, focusing instead on providing a safety net for the most common or broad categories of diseases.

Critical Illness Insurance Cost for Senior Citizens

Let’s look at a comparison of critical illness costs for coverage of $300,000 for both senior male and female applicants. We will use this criterion: 60 years old, no serious health pre-conditions, non-smoker. We will also look at two different types of policies, one covering only three basic critical illnesses and one covering 20+ critical illnesses.

Typically, there are some time limitations for somebody aged 60 when applying for a critical illness policy. The age is often capped at 70, so we are comparing Term 10 CI policy (or Term to 70):

  Female Applicant Male Applicant
Basic CI (4 illnesses): $453/month* $623/month *
Traditional CI (24 illnesses): $519/month** $725/month**

*Quote as of March 2024 from Ivari
**Quote as of March 2024 from Manulife

Critical Illness Insurance over 65

As mentioned in our example above, critical illness insurance is available only for people under 70 (some policies are even capped at 65), so if you are 65, you can get coverage for the next five years to provide you with peace of mind.  After that you would need to rely on other sources of coverage such as your personal finances, existing government coverage, and other insurance policies such as long-term care insurance.

Find out more about Seniors Insurance here.

Critical Illness Insurance: Summary

In our later years, financial protection becomes not just a matter of foresight but a crucial pillar of maintaining our quality of life. The reality of aging is intertwined with an increased risk of health issues, making the need for comprehensive insurance coverage more pronounced than at any other stage in life. While critical illness insurance offers a safety net against the financial repercussions of being diagnosed with a severe health condition, its premiums can be sizeable, especially as one grows older and the risk profile changes. This is where the strategic choice between disability insurance and critical illness insurance becomes particularly relevant for seniors.

Disability insurance, often perceived as the first line of financial defense, provides a continuous income stream if an individual is unable to work due to illness or injury. For seniors, however, the traditional employment-based definition of disability insurance may not always apply, necessitating a more nuanced approach to their coverage needs. Given that many seniors may not be working, or if they are, their income patterns can be vastly different from those in their earlier years, it’s essential that the solutions crafted for them are meticulously tailored.

Our advisors understand the unique financial and health landscapes that seniors navigate. They possess extensive experience in both disability and critical illness insurance for the senior demographic, ensuring that any recommended policy is precisely aligned with the individual’s circumstances. Whether it’s navigating the complexities of CI premiums or structuring a disability insurance plan that reflects the current stage of your life, our team is here to guide you through every step, offering peace of mind that your financial well-being is safeguarded.

Taking the right steps towards financial protection in older age should not be a daunting task. Our knowledgeable advisors are ready to help you explore your options, ensuring that you find the perfect fit between necessity and affordability. We invite you to reach out, discuss your needs, and allow us to tailor a solution that gives you the confidence and security to enjoy your senior years to the fullest. Contact us today to start securing your financial future.