December 2, 2018

What's the difference between disability and critical illness insurance?

These days, there are many different types of insurance designed to protect one of your biggest assets: Yourself. There’s life insurance, health insurance, long-term care insurance—some celebrities even protect specific parts of their body against the possibility of injury.

And while you might not need to insure your teeth for $30 million like Julia Roberts and you probably don’t need $70 million leg insurance like David Beckham, there are types of insurance designed to help you in the event that you can’t work due to illness or injury or suffer a critical illness; they are called disability insurance and critical illness insurance.

While these two types of insurance have similarities because they can help you and your family with often-difficult personal experiences, they actually have many important differences and provide solutions to very different financial protection needs.

Disability insuranceOpens in a new window is a monthly payment that replaces some of your income if you can’t work because of an injury or illness. It typically provides you with 60 to 70 per cent of your income so that you can maintain as much of your standard of living as possible until you can return to your job. 

Critical illness insuranceOpens in a new window, on the other hand, provides a one-time, lump-sum payment that you can use any way you want if you experience one of the serious conditions as defined by your protection, such as cancer, heart attack and stroke. Not everyone’s recovery costs are the same. In addition to the possibility of a leave of absence from your job, a critical illness can sometimes mean that you’re left with the expensive cost of recovery, a need for costly assistive devices, or even travel expenses—things disability insurance may not cover.


Why get it?
Disability insurance Critical illness insurance

Life happens:

Almost half of Canadians live paycheque to paycheque*. If you were suddenly unable to work due to injury or illness, disability insurance can help you maintain your desired lifestyle by replacing some of your lost income, typically in the range of 60-70% of your salary.

You probably can't afford to get sick:

A critical illness can be expensive - lost income if you can't work, medication, treatment costs, etc., all add up. 42% of working Canadians couldn't last six months on their current level of savings if they became critically ill**. With critical illness insurance, you could have the money you need when you need it.


What would I use the money for?

Disability insurance Critical illness insurance

Keeping up with your regular expenses:

The money you receive is intended to cover costs normally covered by your income, for example your bills, mortgage or rent, groceries, child care, and other household expenses

 Any way you want:

  • Pay for small costs like hospital parking
  • Get a private hospital room
  • Cover higer-than-expected medication costs
  • Hire a housekeeper or yard maintenance company so you and your family can spend less time doing chores and more time together
  • Get away from it all - go on a trip with your family while you recover


How long does it take to pay out?

Disability insurance Critical illness insurance

It varies:

Monthly payments typically start after you've been off work with a covered disability for between 30-120 days, depending on your coverage.

Usually after 30 days:

When you survive most of the defined critical illnesses for more than 30 days, your coverage is paid out.



Who can apply?

Disability insurance Critical illness insurance

Employed people:

Disability insurance covers you for an amount reflected by your salary.


Parents, grandparents, even children (through their parents or grandparents).


* Financial Post, September 9, 2015Opens a new website in a new window

**Source: Great-West Life, London Life and Canada LifeTM commissioned Head Research to conduct Critical Illness insurance thought leadership research in August 2015.Opens a new website in a new window

Disability insurance can help you keep up with your existing expenses, but for most, a critical illness comes with its own costs.

Many people diagnosed with a critical illness may still be able to work and are thus ineligible for benefits under their disability insurance coverage. On the other hand, if you break your leg and are unable to work, but all you have is critical illness insurance you might struggle to make ends meet. 

You don't really have a complete financial protection plan until you have considered both disability insurance and critical illness insurance.

Talk to an expert

Not feeling confident in your finances? You can talk to one of our financial security advisors who will work with you to craft a financial plan tailored to your needs.

Contact an advisor