Key points
- It pays a lump sum on the diagnosis of a condition the policy lists, if you meet its terms.
- Most policies have a survival period after the diagnosis before they pay.
- It is not income replacement: disability insurance does that.
- Premiums for a personal policy are not deductible; the benefit from a policy you own and pay for is generally received without tax.
- Employer-paid critical illness premiums are a taxable benefit to the employee.
What critical illness insurance pays
A critical illness policy lists the conditions it covers and defines each one, often in detail. If you are diagnosed with one of them, meet the definition and survive the policy's waiting time after diagnosis (often around 30 days), the insurer pays the sum insured in one payment. The money is yours to use: treatment not covered by provincial health plans, time off for you or a partner, travel to treatment, or keeping up mortgage payments.
Terms worth understanding before you buy: which conditions are covered and how each is defined, any partial payments for less severe conditions, exclusions for conditions you had before, the survival period, and whether any premiums can be returned if you never claim.
Critical illness or disability insurance?
| Feature | Critical illness | Disability |
|---|---|---|
| Pays on | A diagnosis of a listed condition | Being unable to work, as defined |
| How it pays | One lump sum | A monthly benefit for a period |
| Needs you to stop work? | No | Yes |
Many people look at the two together, because each covers a gap the other leaves; see disability insurance.
Critical illness insurance and tax
- A personal policy you own and pay for: the premiums are a personal cost and not deductible, and the lump sum is generally received without tax.
- Through your employer: the CRA's employers' guide lists critical illness insurance among group plans whose employer-paid premiums are a taxable benefit to the employee.
- Owned by your corporation: the company pays the premiums and receives the benefit, and the tax result depends on how the policy is set up and who benefits. Settle it with us before the policy is put in place.
Ask the agent: what exactly is covered and excluded, when the cover starts and ends, whether the premium can change, and what happens if you stop paying.
Where Finvo fits
We explain the tax side: whether a critical illness policy is best owned personally or through your company, how employer-paid premiums show up on payroll, and how the premium fits your budget.
Finvo itself does not sell insurance or give insurance advice. Finvo can connect you with a licensed insurance agent from our partner network who can help with insurance advice if you need it. The licensed agent advises on products and coverage; Finvo covers the tax side. Insurance and other specialists are joining Finvo as contractors, so a group of consultants can work on your file together and you don't have to go from place to place.
Whoever you deal with, you can check that an agent is licensed: in British Columbia with the Insurance Council of BC licensee directory, and in Alberta with the Alberta Insurance Council agent lookup.
This page is general information, checked against the sources below on 5 Nov 2026. Every policy and plan has its own terms; it isn't insurance, tax, investment or legal advice for your situation.