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Employee BenefitsGroup Critical Illness InsuranceGroup Critical Illness Insurance vs Individual Policy: A Detailed Comparison for Canadians

Group Critical Illness Insurance vs Individual Policy: A Detailed Comparison for Canadians

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Group critical illness insurance has become an increasingly popular option for Canadians looking to protect themselves financially in a severe health crisis. However, when choosing between a group critical illness policy through your employer versus getting an individual policy on your own, there are some key differences to understand.

This comprehensive guide will provide an in-depth comparison of group critical illness insurance vs individual policy. We’ll define what critical illness insurance is, break down the pros and cons of each type of policy, and analyze the differences in eligibility, flexibility, costs, and more. Read on for expert insights to help you determine whether group or individual critical illness insurance is the better choice for your needs and budget as a Canadian.

Learn more: Group Life Insurance vs Individual Life Insurance: Which Is Better for Your Needs?

What is Critical Illness Insurance?

What is Critical Illness Insurance? ebs
What is Critical Illness Insurance?

Before discussing group versus individual policies, let’s first define critical illness insurance.

Critical illness insurance, sometimes called dread disease insurance, is designed to pay out a lump sum of cash if the policyholder is diagnosed with certain serious illnesses. This tax-free cash benefit can help cover expenses related to treatments, replacing lost income, paying off debts, and managing daily living costs while ill.

According to the Canadian Life and Health Insurance Association (CLHIA), the most common critical illnesses covered are:

  • Cancer
  • Heart attack
  • Coronary artery bypass surgery
  • Stroke
  • Major organ failure requiring transplant
  • Paralysis
  • Coma
  • Severe burns
  • Loss of sight, hearing, or speech
  • Multiple sclerosis
  • Aortic surgery
  • Alzheimer’s disease
  • Parkinson’s disease

The lump sum payment provided by critical illness insurance can make a significant difference in helping the policyholder and their family cope financially following a critical diagnosis. Given the potentially high costs of treatment and recovery, and many of these conditions can disrupt one’s ability to work, critical illness insurance is increasingly seen as a vital component of a comprehensive financial safety net.

According to CLHIA, as of 2020, over 2 million Canadians were protected with critical illness insurance coverage.

Source: https://www.clhia.ca/web/CLHIA_LP4W_LND_Webstation.nsf/page/5CBE118B22C4F47C85258AC20057011A!OpenDocument

What is Group Critical Illness Insurance?

Group critical illness insurance is a policy provided through an employer or other association that covers all members of a defined group.

Some of the key things to know about group critical illness insurance include:

  • Available through Employers: Most group critical illness coverage is offered by employers as part of the employee benefits program. Companies decide to provide this coverage as an added incentive for recruitment and retention.
  • Premiums Paid by Employer and Employee: For group policies, premiums are usually split between the employer and employees.
  • Guaranteed Coverage Option: Group critical illness insurance typically allows employees to sign up without medical underwriting. Coverage is “guaranteed,” meaning it is not contingent on the individual’s health history.
  • Preset Options: The employer chooses the critical illness policy options available to employees, including the covered conditions, benefit amounts, and other details.
  • Added with Other Benefits: Enrollment in group critical illness insurance usually happens alongside enrollment in other employer-provided benefits like health, dental, disability, and life insurance.

The essential advantage of group critical illness coverage is that it makes getting this protection simple and affordable since the large group of employees shares premium costs. It also comes with the convenience of enrolling in the workplace benefits program. However, the tradeoff is less flexibility and customization for individual circumstances.

Learn more: Group Critical Illness Riders vs Standalone Policies: Which Is Better for You

What is an Individual Critical Illness Insurance?

In contrast to group critical illness insurance, an individual policy is one that you purchase directly from an insurance provider. This allows you to get coverage tailored specifically for your needs. Here’s an overview:

  • Purchased Privately: Individual critical illness insurance is purchased through an insurance company or broker rather than acquired through an employer.
  • Requires Underwriting: To qualify for individual coverage, you must complete the insurance provider’s medical underwriting process, including disclosing your health history and being assessed for risk factors.
  • Customizable: You can select the critical illness coverage details you want, such as benefit amount, illnesses covered, premium amount, length of coverage, and more. This is not a “one-size-fits-all” policy.
  • Portable: Individual critical illness insurance is portable and practical even if you change jobs or retire. You retain the policy.
  • Potentially Higher Premiums: Without an employer sharing the cost, monthly or annual premiums for individual coverage may be higher than for group plans. However, for some, the long-term customization and security of owning the policy are worth the extra cost.

The primary benefit of individual critical illness insurance is that you can get a policy explicitly aligned to your needs, health history, budget, and risk tolerance. But you do need to be approved through underwriting and take on the total premium cost yourself.

Comparing Group Critical Illness Insurance vs Individual Policy

Comparing Group Critical Illness Insurance vs Individual Policy ebs
Comparing Group Critical Illness Insurance vs Individual Policy

Now that we’ve defined what both group and individual critical illness insurance entail let’s take a deeper look at how the two options differ across some key categories:

Eligibility Requirements

One significant difference between group and individual critical illness insurance is eligibility.

Group Policies: These allow for “guaranteed issue” coverage, meaning you can enroll without any medical underwriting or health questions as long as you’re eligible through your employer. You avoid exclusions for pre-existing conditions and don’t need to provide evidence of insurability. As long as you’re in the defined group, you can receive coverage up to the guaranteed amount set by the policy.

Individual Policies: To qualify for critical illness insurance, you must complete a medical questionnaire and examination in most cases. The insurance company will evaluate your risk factors, including age, family history, lifestyle, medications, and current health issues. You may be declined coverage based on your health status and medical history. Even if approved, certain conditions may be excluded from coverage.

For those with health concerns or a history of critical illnesses, a group policy can provide a way to access this coverage without exclusions or sky-high premiums. For healthy individuals who can qualify easily, individual policies allow you to customize and lock in long-term terms.

Underwriting Process

Differences in the underwriting process, which is the insurance company’s risk assessment, are tied to the eligibility requirements.

Group Policies: No underwriting is generally required if enrolling for a “guaranteed” amount during an open enrollment period. In some cases, if you want coverage amounts above the guaranteed threshold, you may need to provide health information. However, for most employees, underwriting is avoided with group critical illness insurance.

Individual Policies: To buy a policy on your own, you must go through the insurance provider’s underwriting steps. This often includes completing detailed health questionnaires, getting a medical exam, providing medical records, and possibly doing lab tests. You may also need to provide financial documentation. The insurer will use this information to evaluate your health status and risk factors to decide coverage terms and pricing.

Flexibility in coverage

The level of customization available depends on whether you opt for group or individual coverage.

Group Policies: The employer pre-selects the critical illness policy features, including the benefit amount (e.g., $10,000 or $20,000), illnesses covered, length of coverage, and premium cost sharing. Employees must choose from the preset options if they enroll. There is little ability to tailor the policy to your needs.

Individual Policies: Since you buy the policy directly from the insurer, you can customize the coverage details you need. The benefit amount, coverage length, premium cost, illnesses covered, exclusions, deductible amount, and other factors can all be adjusted to align a policy with your health risks and budget. You also have more insurers to choose from on the open market.

Those seeking an optimized level of coverage will benefit most from an individual policy that can be honed to meet needs precisely. But for straightforward protection, group plans with standardized options are the best option.

Learn more: Optional Group Critical Illness Insurance in Canada

Portability of Coverage

Do you get to keep your critical illness insurance if you leave your employer or retire? Here’s how portability compares.

Group Policies: For most group critical illness insurance plans employers provide, the coverage ends if you leave the company for any reason. You can’t take the policy with you as is. You may be able to convert it to an individual policy, but there will be a cost.

Individual Policies: One of the best advantages of individual critical illness insurance is that you fully own the policy. This means you can maintain the same coverage even after changing jobs, retiring, moving, or other life changes. The policy stays with you as long as you pay the premiums. This stability is invaluable long-term.

Cost of Coverage

When evaluating group versus individual critical illness insurance, the cost implications are essential to weigh.

Group Policies: One key perk of group critical illness insurance is sharing premium costs between employees and the employer. Your out-of-pocket cost is reduced through this group structure.

Individual Policies: With individual critical illness insurance, you, as the policyholder, have to pay 100% of premium costs yourself. There is no employer to subsidize it. However, costs can vary more widely based on your chosen coverage details. Factors like a longer waiting period, lower benefit amount, and strict exclusions can reduce monthly premium costs. But you have to cover it all yourself.

For budget-conscious consumers, the premium-sharing aspect of group policies makes critical illness insurance affordable. But for some, the tradeoff of lower premiums is less flexibility in coverage customization down the road. With an individual policy, you pay more but own the long-term coverage.

Tax Implications

In Canada, the tax treatment of critical illness insurance benefits differs depending on whether you have group or individual coverage.

Group Policies: The lump sum payment is considered taxable income if you receive critical illness benefits through an employer-sponsored group insurance policy. You must report it on your tax return and pay tax on the amount. An exception is if the employer paid 100% of premiums, in which case the benefit is not taxed.

Individual Policies: The lump sum payout you receive is not considered taxable income for critical illness insurance policies you purchase privately on the individual market. You do not pay tax on benefit amounts from individually-owned policies, even if you paid premiums with after-tax dollars.

The tax-free status of payouts from individual critical illness policies provides significant financial advantages for those seeking to maximize benefits. With group coverage, taxes eat into the already reduced lump sum amount.

Which is Better – Group Critical Illness Insurance or Individual Critical Illness Insurance Policy?

Which is Better – Group Critical Illness Insurance or Individual Policy? ebs
Which is Better – Group Critical Illness Insurance or Individual Policy?

So, when it comes down to the big question of group versus individual critical illness insurance, how do you choose what’s right for you?

Here is a summary of some key decision points:

  • Group critical illness insurance advantages:
    • Lower premium costs due to employer subsidies
    • Guaranteed issue access without health questions in many cases
    • Simple enrollment, alongside other workplace benefits
    • Avoiding medical underwriting is beneficial for those with health conditions
  • Individual critical illness insurance advantages:
    • Customizable coverage aligned to your specific needs
    • Ownership and portability of the policy
    • Potential for lower net costs when factoring in taxes on benefits
    • Locked-in rates for long-term stability
    • Underwriting gives clarity on what is and isn’t covered
    • Not dependent on the employer’s chosen policy

Generally, group policies offer convenience and cost savings but need more flexibility. Individual policies provide tailored coverage you control long-term but at a higher total premium cost.

Consider your health history, expected time with your employer, desire for custom benefits, budget, tax situation, and future portability needs. For many younger, healthy Canadians planning a stable career with their current employer, group critical illness insurance makes sense for starter protection.

For others, owning an individual policy from the outset can provide peace of mind, knowing you control the terms and can maintain life coverage. Some individuals or families may get group and individual policies to maximize financial protection.


Critical illness insurance provides invaluable financial protection during a life-altering health diagnosis. While group and individual policies provide lump sum payouts to offset treatment costs and lost income, there are tradeoffs to evaluate.

Group critical illness insurance available through your employer includes subsidized premiums, guaranteed access, and easy enrollment. However, coverage options are preset and non-portable in most cases.

Individual policies require health underwriting and have higher premium costs, but in return, they allow you to get customized and portable coverage in the long run.

For many Canadians, having both group and individual critical illness insurance can provide income replacement and the financial means to cope with an illness and beyond. Compare options to meet best your health risks, coverage goals, and budget needs. With critical illness striking 1 in 2 Canadians during their lifetime, this specialized insurance can make all the difference in maintaining your financial health.

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For many Canadians, having both group critical illness insurance and individual policy can provide income replacement and the financial means to cope with an illness and beyond. ebs
For many Canadians, having both group critical illness insurance and individual policy can provide income replacement and the financial means to cope with an illness and beyond.

FAQs about Group Critical Illness Insurance vs Individual Policies

Here are some suggested frequently asked questions (FAQs) about group critical illness insurance versus individual policies:

What's the difference between group and individual critical illness insurance?

Group critical illness insurance is coverage offered through an employer or association to its members. Individual policies are purchased privately through an insurance provider. Group plans come with set coverage options, while individual plans are customizable.

What are the advantages of group critical illness insurance?

Group critical illness insurance offers advantages such as lower premium costs since they are shared by the group, guaranteed enrollment without health screening, convenient payroll deduction of premiums, and access to coverage you may not qualify for individually.

What are the advantages of an individual critical illness policy?

The main advantages of individual critical illness policies are the ability to customize your coverage, choose your preferred benefit amounts, select specific conditions to cover or exclude, lock in rates long-term, and take the policy with you if you change jobs or retire.

Is the underwriting process different for group vs individual coverage?

Getting group critical illness insurance only requires being eligible through your employer, while individual policies require full medical underwriting. Pre-existing conditions don't preclude group enrollment but may disqualify you from individual coverage.

Can I keep my critical illness insurance if I leave my employer?

Usually, group critical illness insurance ends when you leave your job. Individual policies you purchase directly are fully portable and remain effective if you pay premiums.

Are benefits from group or individual policies taxed differently?

In Canada, group critical illness benefits are considered taxable income, while benefits from individual policies are not taxed. This can impact net payouts significantly.

How do I know which type of critical illness insurance is right for me?

Assessing your health, budget, desire for flexibility in coverage, expected longevity with your employer, and other factors can help determine if group or individual coverage better suits your needs. Speaking with an advisor can provide guidance.

What pre-existing conditions may be excluded from critical illness policies?

For individual policies, conditions before purchasing coverage may be permanently excluded. There are no exclusions for group policies as long as you enroll when first eligible. Waiting periods for recent diagnoses may still apply.

Article Source

Ebsource enables prudent benefits decisions. Our unbiased insights come from financial veterans aligned to industry best practices. We source accurate data from respected agencies like Statistics Canada. Through extensive research of top providers, we offer custom recommendations matched to individual needs and budgets. At Ebsource, we maintain strict editorial standards and transparent sourcing. We aim to equip Canadians with trusted knowledge to choose the ideal benefits confidently. Our purpose is being Canada’s most dependable resource for savvy benefits guidance.

Benefits Basics for Employers: Understanding Life and Critical Illness Insurance – grouphealth.ca
Group critical illness insurance: What is it & is it worth it? – meetbreeze.com
Group Critical Illness Insurance – coloniallife.com

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