Do I Need Disability Insurance if I Have Critical Illness Insurance?

Having critical illness insurance does not mean you do not disability insurance. Learn why that is the case in this Dundas Life blog

April 1, 2021

“I don’t require critical illness coverage because I already have a disability insurance policy.”

It is easy to think along on these lines if you own a disability insurance policy. Many people think critical illness and disability insurance are the same thing, as they do have some aspects in common.

However, critical illness insurance and disability insurance are two very different insurance products. What is more, you may well need critical illness insurance even if you have disability insurance.

What is critical illness insurance?

Doctor examining x-ray

Critical illness insurance issues you a lump-sum cash benefit if you develop a serious illness. It is also known as critical care insurance or critical illness cover.

Most plans include coverage for illnesses such as cancer, heart failure, stroke, kidney failure, and other serious illnesses. Some plans are more exhaustive than others, so be sure to consult with the insurer regarding what illnesses are included in the plan.

The payout is your money to use however you like. You can use it to cover out-of-pocket expenses, take care of mortgage repayments, or even pay for a holiday once you recover.

You may be required to survive a minimum number of days — typically 30 days — after the diagnosis before you can receive the benefit. This period is referred to as the waiting period or the survival period.

You can buy critical illness insurance as a fully underwritten policy or a guaranteed issue policy. For the former, you must take a physical exam. A guaranteed issue policy, by contrast, only requires you to answer a few health questions to qualify.

What does critical illness insurance cover?

Critical illness insurance policies typically list illnesses for which you will receive a payout should you become ill. You may not get the benefit if your illness does not fit into any of the specified categories. And if your illness is not life-threatening or serious, you may only receive a partial benefit.

Critical illness insurance generally covers the following illnesses:

  • Cancer – The insurer will pay the full benefit amount only if your cancer is serious or life-threatening. You may receive a partial benefit in the case of a less serious form of cancer.
  • Heart conditions – Generally, you will receive the full payout in the event of a heart attack and stroke. Coronary artery disease, on the other hand, is likely to result in a partial payout.
  • Organ damage – This category includes conditions resulting due to a major organ transplant, as well as kidney failure.
  • Other medical conditions – This category covers illnesses and conditions such as blindness, deafness, malaria, paralysis, ALS, etc.

What is not covered by critical illness insurance?

It is important to remember an insurer will not issue a payout if your illness is not serious. Also, chronic illnesses, such as asthma and diabetes, are usually excluded from a critical illness plan. You will receive the benefit payout amount only for those conditions specified in your policy.

What is disability insurance?

Man with prosthetic leg sitting on a bench

A disability insurance policy is a binding contract between the insurer and the insured. In exchange for premiums, the insurance carrier promises to pay out a monthly payment if you suffer injury or illness resulting in disability, that in turn, effects your ability to earn a living. You will receive the monthly benefit until you recover or the coverage period ends, whichever is first.

Disability insurance replaces a part of your monthly income when you are unable to earn a living due to a disability. While you can use the benefit however you like, the monthly payment structure is designed to mimic your salary. Generally speaking, these monthly payments are intended to help you put food on the table, cover home loan repayments, and defray monthly living expenses while you are unable to work.

How is disability insurance different from critical illness insurance?

Multiple question marks out of man's hand

In this section, we will look at critical illness vs. disability insurance. However, first, let’s examine the similarities between the two.

Both critical illness and disability insurance offer protection to you directly rather than to your beneficiary. That is, you receive the payouts while you are still alive. And in both cases, you can use the payments in any way you like.

Even with these similarities, important differences (highlighted below) exist between the two.

How do you receive the payout?

Critical Illness Disability Insurance
You receive the benefit amount as one lump-sum payment. You receive monthly payments until you recover or a specific period ends, whichever comes first.

How soon do you receive the payout?

Critical Illness Disability Insurance
Generally, you receive the payment 30 days after your diagnosis. You start receiving monthly benefits after you have been off work due to a covered condition for anywhere between 30 and 120 days.

Do you need to be employed to apply?

Critical Illness Disability Insurance
No, you do not. Anyone can apply for critical illness. Yes, you must be employed. This type of life insurance product covers you for an amount based on your paycheck.

Does it cover injuries?

Critical Illness Disability Insurance
No, it does not. Critical illness policies only cover illnesses. Yes, it does cover injuries. You will receive monthly payments if you have had a life-changing injury or accident.

How long does it take to pay out?

As a rule of thumb, you are likely to receive the critical illness benefit 30 days after your diagnosis.

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

Insurance needs are subjective, so the answer depends on your personal situation. Having said that, before you make a decision consider the information below.

In most cases, disability insurance covers 60% to 70% of your income. It provides monthly payments designed to help you cover basic expenses. These may include your groceries, monthly bills, and mortgage payments.

On the other hand, critical illness provides you with a lump sum to help you cover additional expenses associated with a severe illness, such as medical care costs not covered by your health policy. It is common for most people to feel they do not have enough financial surpluses while they are earning; imagine what it may be like living with a disability on 60% of your salary. You are likely to have a shortfall, which may quickly drain your savings.

This is where critical illness coverage can prove useful. It can chip in with an extra payment that you can use to cover any shortfall.

When considering whether to buy critical illness, ask yourself:

  • Do I have enough funds if my critical illness prolongs my disability?
  • Would I be able to cover medical care and other additional costs that my illness may require without dipping into my savings?
  • Would I be able to pay out-of-pocket expenses associated with frequent hospital visits?
  • What if my spouse decides to temporarily give up employment in order to support me?


A critical illness insurance policy issues you a payout if you are diagnosed with a severe illness. You can use the money to cover out-of-pocket medical expenses and other costs related to a serious illness. Together with disability life insurance, it provides you with a robust financial safety-net which will protect you from having to use your savings or becoming bankrupt.

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