Higher Probability of Claim
The primary reason critical illness insurance costs more than life insurance is simple statistics: you are far more likely to suffer a critical illness during your working years than you are to die.
- Nearly 1 in 2 Canadians will be diagnosed with cancer in their lifetime.
- Heart disease and stroke are leading causes of hospitalization.
Because the risk of the insurance company having to pay out is significantly higher, the premiums must reflect that risk.
Claims are Paid Earlier
With life insurance, the payout happens at the end of a life (which might be age 85 or 90). Critical illness claims often happen much earlier—in your 40s, 50s, or 60s. The insurance company has less time to invest your premiums before potentially having to pay out a large lump sum.
Complexity of Coverage
Adjudicating critical illness claims is more complex than life insurance. It requires detailed medical definitions and assessments. As medical technology advances, leading to earlier detection of illnesses, policies have to be carefully priced to account for diagnoses that might not have been possible (or survivable) a decade ago.
How to Lower the Cost
If you find the premiums steep, consider these strategies:
- Reduce the Benefit Amount: Some coverage is better than none. A $50,000 policy is much more affordable than $200,000 and still provides a helpful cushion.
- Choose a Shorter Term: A Term 10 policy is the cheapest option. It buys you coverage for right now.
- Drop the Bells and Whistles: Features like "Return of Premium" are excellent but expensive. Removing them can cut premiums in half.
- Limit Covered Conditions: Some insurers offer "basic" plans that only cover the Big 3 (Cancer, Heart Attack, Stroke) or Big 4 conditions. These are less expensive than comprehensive plans covering 25+ illnesses.