What is Children’s Critical Illness Insurance?

Deciding whether to buy critical illness insurance cover for your child can be challenging, as it involves considering unpleasant possibilities. 

However, a bad situation can become even more distressing if you lack the funds to cover potential medical or living expenses during the treatment period. 

A child critical illness insurance policy gives peace of mind that if the unthinkable happens, you will be able to pay for your child’s treatment, cover daily living expenses, and take the needed time off work. 

Key Takeaways

• Children’s critical illness insurance provides valuable financial support at a difficult time
• Parents can buy a standalone critical illness insurance policy for their children or add a rider to their critical illness insurance plan
• A single policy covers all your children, including those born in the future
• Children are covered from birth up to age 21 or 25 and coverage typically includes several childhood illnesses, in addition to other serious conditions  

What is critical illness insurance?

Critical illness insurance provides financial support if you’re diagnosed with one of the conditions included in your policy. The tax-free, one-time payment helps you pay for medical expenses not covered by your provincial healthcare plan, as well as non-medical expenses, such as mortgage payments and daily living expenses. 

Like life insurance, critical illness insurance pays out only once, after which the coverage terminates. The illnesses and conditions covered can vary from one policy to another. The most comprehensive plans can cover 26 conditions or more, whereas basic plans limit coverage to five or six illnesses. 

Keep in mind you need to survive a specific period after being diagnosed with a covered condition before you can collect the critical illness benefit. This period is referred to as the survival period, and it usually ranges between 14 days to 90 days. 

What is children’s critical illness insurance?

Children’s critical illness insurance pays a tax-free, lump-sum amount if the insured develops any of the approved illnesses and conditions listed in the policy. 

Critical illness insurance for children works pretty much the same way as critical illness cover for adults. However, there are three main differences between the two: 

1. In the case of child critical illness insurance, the insured is a child, not an adult.
2. Critical illness insurance policies for children include a few extra conditions. These are childhood illnesses such as congenital heart disease, cystic fibrosis, and cerebral palsy.  
3. Children’s critical illness policies have a shorter survival period, often not more than 14 days.

What does children’s critical illness insurance cover?

Generally, there are two types of critical illness insurance plans available in Canada: basic and comprehensive (enhanced). With a basic plan, you are covered for five or six most common critical illnesses, such as stroke, heart attack, kidney disease, etc. An Enhanced plan, in contrast, covers 25 or 26 critical illnesses. 

Children’s critical illness insurance policies include a few additional childhood illnesses that are not part of a standard basic or enhanced critical illness cover. 

Childhood illnesses commonly covered include: 

• Cystic fibrosis
• Autism spectrum disorder
• Cerebral palsy
• Rett syndrome
• Type 1 diabetes mellitus
• Muscular dystrophy

This is not an exhaustive list by any means. Your child critical illness insurance plan may include additional or fewer conditions than those listed above. It may also include certain exclusions. 

Read the policy document carefully to ensure you understand what is covered and what is not. If you find the policy wording too technical or complex, it may be a good idea to speak with an experienced insurance advisor. He or she can simplify the insurance jargon, helping you understand exactly what you are signing up for. 

What does children’s critical illness insurance not cover? 

Hereditary conditions, health conditions present at birth, and illnesses that predate the start of the policy are typically not covered. But as said before, each insurance plan is different, so read the policy document before signing. 

What are the main benefits of children’s critical illness?

Children’s critical illness insurance cover provides valuable financial help at a difficult time. Paid as a tax-free, lump-sum amount, critical illness benefit can help you cover various expenses, including but not limited to: 

• Loss of income if you need to take extended time off work
• Medical bills not covered by provincial healthcare and group health insurance, if you have one
• Home adaptations and medical equipment
• Debt payments, including mortgage 
• Transportation to and from a hospital and rehabilitation centre

When can you buy a child critical illness insurance policy?

Child critical illness insurance can be purchased after the child is born and up to age of 25. However, while you can apply for a child critical illness plan as soon as your child is born, most insurers require the contract to be issued at least one month after the child’s birth. 

When can a child’s critical illness insurance policy be claimed?

You can file a claim if the child develops any of the serious illnesses listed in the policy and survives the waiting or surviving period. The diagnosis must be made by a qualified physician or specialist, who is licensed to practice in Canada. 

Does my critical illness policy cover my child?

Your critical illness insurance plan is likely to cover only you, but you may have the option to add a child critical illness insurance rider. The rider can only be added at the time of purchase of the original policy. The rider covers your natural, legally adopted, and stepchildren, as well any child you may have in the future.

Child critical illness insurance riders typically offer smaller payouts compared to standalone policies. The payout is usually a certain percentage of the policy sum assured, such as 25% of the total benefit amount, or a flat amount. 

You can claim this benefit once for each child you have. After a successful claim for one child, your other children will still be covered. However, some insurers limit the number of successful claims you can make under this rider. For example, some children’s critical insurance riders pay one claim per child, to a maximum of two children. 

A claim under children’s critical illness cover doesn’t affect the policy sum assured. This means if you develop a critical illness after having filed a successful claim for one of your children, you’ll still receive the original benefit amount. 

What is a limited pay child critical illness insurance cover?

Limited pay child critical illness insurance is a type of critical illness cover with a limited payment period. In other words, the premiums are paid over a set period of time, say 5 or 10 years.

After the set period is over, the plan is fully paid up, and the coverage continues until the end of the original term without the need to pay more premiums. 

The limited pay option is as common with critical illness as with life insurance, even less so with child critical illness. However, a few Canadian insurers do offer this option. Typically, the limited pay option is available with critical illness insurance plans that last for the insured’s entire life. 

Here’s an example that illustrates how the limited-pay option works: 

Martin is interested in buying critical illness cover for his first-born child, Olivia. However, instead of a plan that lasts only until Olivia's 21^st or 18^th birthday, he wants a policy that provides protection for life. So, he purchases a 10-year limited pay critical illness insurance. 

The policy guarantees lifelong coverage against approved illnesses in exchange for a set number of premium payments over a 10-year period. And once Olivia reaches the age of majority, the policy ownership will be automatically transferred to her. 

Conclusion

Critical illness insurance cover pays a lump-sum amount if your child falls seriously ill. The cost of coverage depends on the benefit amount, the number of illnesses covered, and your choice of insurer.

Since premiums vary widely by insurer, it’s smart to compare quotes of different providers.

At Dundas Life, we work with some of Canada's leading life insurance companies and can get you free, no-obligation price quotes from multiple insurers. This will help you secure the right coverage for your child at an affordable price. Talk to a licensed advisor today.

FAQs

Do children’ critical illness insurance plans offer a return of premium riders? 

Some plans offer this rider for an additional premium, others don't. A return of premium rider allows you to receive a full refund of the money you paid in premiums if you don’t file a claim during the policy term.

The idea of recouping premiums if no claim is made sounds appealing, but this option comes at a hefty cost. Adding this rider to your plan will increase the monthly premium considerably. 

Can I get a critical illness policy after my child is diagnosed with a serious illness?

No, if your child is currently being treated for a serious illness, insurers will turn down your application. However, you can get coverage after your child has recovered, though the policy will likely not cover any pre-existing illnesses. 

Do standard critical illness insurance plans include child cover by default? 

In most cases (if not all), you’ll need to pay an additional premium to add a child critical illness insurance rider to your own plan.