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What Is Critical Illness Insurance?

Life-altering medical conditions can also have major financial implications, often requiring time off work and payments for childcare, medications, alternative treatments, and even home modifications.

That’s where critical illness insurance comes in. It can provide a benefit, so if you’re ever diagnosed with a serious illness, you don’t have to dip into your RRSPs or take on debt just to keep life on track.

Read on to learn how to choose the best critical illness insurance in Canada that works for you.

Key takeaways

  • Critical illness coverage is a type of insurance that pays a benefit if you’re diagnosed with a serious illness or condition, such as life-threatening cancer, a heart attack, or a stroke.
  • The benefit is a tax-free lump sum that you can use to fill gaps in your provincial health insurance, modify your home, cover daily expenses, or even continue to pay into your retirement savings.
  • This type of insurance has pros, including financial protection, income replacement, and flexibility.
  • There are also contract conditions to consider, such as no coverage for pre-existing conditions and potential overlap with other types of insurance you’ve purchased.
  • This insurance can be especially beneficial for primary breadwinners, caregivers, self-employed people, and business owners.

What is critical illness insurance, and why do I need it?

Critical illness insurance, sometimes called “critical care insurance” or “critical illness coverage,” is a type of coverage that pays out a tax-free lump sum if you’re diagnosed with a serious medical condition or illness. It’s designed to help Canadians or individuals living in Canada pay for all the additional costs (such as medications, home care, travel, accommodations, and childcare) and loss of income that can occur with certain types of life-threatening cancers, strokes, heart attacks, and more.

How does critical illness insurance work?

Are you interested in critical illness insurance? Here’s how to secure the right plan and, in the event of a serious illness, make a claim.

  1. Choose a policy and coverage amount: First, you’ll need to choose the policy and coverage level that work for you. Typically, you can add a rider to another policy, such as life insurance, or buy a stand-alone policy. RBC Insurance, for example, has two stand-alone policies covering a different range of illnesses: Critical Illness Recovery Plan and Critical Illness Insurance Plan (a more basic type of coverage). You’ll then need to determine how much coverage (or the payout size) you want to receive in the event of a critical illness. The more coverage you want, the higher the premiums you’ll have to pay. Working with a licensed insurance advisor can help you get the right level of coverage for your unique situation.
  1. Set your premium and pay it: You’ll need to pay a premium each month, quarter, or year (depending on the policy) in exchange for insurance coverage. The premium will depend on factors such as: the policy you choose, the coverage amount you want, your age, your overall health level, and your smoking status. Your premium may be fixed (meaning, it won’t change) or variable, depending on your policy.
  1. File a claim: If you’re diagnosed with one of the illnesses covered in your policy, you’ll need to ensure that you meet all of the policy’s criteria for the survival period (number of days you’ve had the illness before the benefit will be paid out) and the severity. There may also be a waiting period after you purchase the insurance when you cannot make any claims. When you submit a claim to your provider, you’ll need medical documentation that proves the diagnosis and you may even require additional medical exams.
  1. Receive the payout: If your claim is approved, your insurer will provide you with a lump-sum payout. It will be an amount that has been predetermined by your coverage level and is not tied to the actual cost of your lost wages or treatment. You can use the payout any way you want.

What is not covered by critical illness insurance?

All policies will have exemptions. Typically, critical illness insurance will not cover illness, injury, or death in these situations:

  • Self-inflicted injury, attempted suicide, or suicide.
  • Intentional use of any drug, intoxicant, narcotic, or poisonous substance.
  • Participation in a war or a hostile action (insurrection, civil commotion, etc.).
  • Attempt to commit or actual commission of a crime, whether charged or not.
  • Operating any land, water, or air conveyance (a.k.a. car, boat, or plane) that requires more than muscular power while under the influence of any drug, intoxicant, narcotic, or poisonous substance. For alcohol, the limit is 80 milligrams of alcohol per 100 millilitres of blood.

It’s best to check with your insurer for specific exclusions, since policies vary.

What are the advantages of critical illness insurance?

  • Financial protection: Treatments and time spent resting (not working) can be expensive. By using the lump-sum payout for your daily expenses, you can protect your savings and avoid drawing from your RRSPs and/or going into debt.
  • Income replacement: If you’re unable to work during your treatment and recovery, the lump sum can replace lost income. For business owners or those who are self-employed, it can even be used to maintain operations, cover business expenses, or hire help.
  • Coverage moves with you: If you have critical illness insurance through your employer and you lose your job or switch employers,you lose that coverage. Purchasing a policy separate from your employer ensures you have critical illness coverage regardless of your employer or employment status.
  • Flexibility: Unlike regular health insurance, which usually pays directly to health-care providers, critical illness insurance pays a sum directly to you. You can use the payout however you want: for medication copayments, to take time off work to recover, for therapies not covered by health insurance, or even a vacation for you and your family during recovery.
  • Coverage for multiple conditions: Thanks to advancements in modern medicine, you have a high chance of surviving a serious illness. The bad news? Your finances could be hit hard while you recover. Luckily, critical illness insurance covers many conditions that could affect you during your lifetime.
  • Peace of mind: In the event that you do experience a critical illness, you won’t need to worry about finances and will be able to focus on your most important task: getting better. Plus, budgeting for annual premiums, which are typically fixed for a term, is a lot less stressful than falling ill and suddenly needing to come up with a huge sum of money without insurance. 

What are the contract conditions to be aware of with critical illness insurance?

  • Lack of coverage for pre-existing health conditions: Typically, any illness you’ve already been diagnosed with before applying for insurance is not eligible for coverage. In some cases, you might not be eligible for critical illness insurance at all, or there may be a waiting period before coverage can begin.
  • Survival period requirement: Some policies have a “survival period” clause, which means you must survive your illness for a certain number of days before receiving a payout. RBC Insurance’s minimum survival period for most covered conditions is 30 days; although, some covered conditions require a longer period before benefits are payable.
  • Limited covered illnesses: Your policy will only cover you for a specified list of illnesses. The longer the list of covered conditions, the more you’ll pay in premiums. You won’t receive a payout if you’re diagnosed with an illness that’s not on the list.

Who should consider critical illness insurance?

There are certain people who will benefit the most from purchasing critical illness insurance.

  • Primary breadwinners: Your family relies on you to cover the big expenses, such as mortgage payments, school fees, credit card bills, and more. Critical illness insurance can give you financial stability even if you aren’t able to work for a period of time due to illness, reducing stress for you and your dependants.
  • Self-employed individuals and business owners: A payout from critical illness insurance can provide crucial financial support during a health crisis. It may even help to cover business expenses, hire temporary staff, and keep things running in your absence. 
  • Caregivers with dependants: In addition to everything else you do, you’re a caregiver. And if you get sick, you might not be able to provide care to your children, aging parents, or family members with disabilities. Critical illness insurance can help you pay for substitute caregivers and other related costs if you need time off for treatment and rest.
  • People with high-stress occupations or lifestyles: Whether you work in a hazardous environment or have a high-stress job, you may be at a greater risk for certain illnesses and conditions. Even if a career change isn’t in the cards, you can help guard against financial strain from future health issues with insurance. (Note: Some occupations are excluded from coverage. Be sure to clarify with your provider.)

Frequently asked questions

How do I choose the right critical illness insurance policy?

You’ll need to take a look at your unique situation and weigh these factors.

  • Covered illnesses: Are you at risk for certain health conditions, and are they covered?
  • Coverage amount: What lump-sum payout will be enough to cover your expenses?
  • Premium costs: How much can you afford to pay in premiums each year, considering they might increase over time?
  • Exclusions and limitations: Do you understand the potential exclusions or conditions that could affect your eligibility for a payout?
  • Length of coverage: How long do you need coverage? Do you need to consider adding a rider (if your provider allows) to extend the length of your coverage?
  • Insurer reputation: Does the insurer you want to use have a good reputation, financial stability, and a clear and reasonable claims-approval process?

What illnesses are typically covered by critical illness insurance?

Some policies are extensive, while others are limited. Here are some commonly covered illnesses:

  • Cancer (life-threatening)
  • Heart attack
  • Stroke
  • Kidney failure
  • Major organ transplant
  • Multiple sclerosis
  • Coronary artery bypass surgery
  • Dementia, including Alzheimer’s disease

If the disease or illness is not explicitly listed in your policy, you won’t receive any coverage for it.

How is critical illness insurance different from health insurance?

Critical illness insurance is a type of health insurance, but it’s different from health and dental insurance. Health and dental insurance typically cover medical costs directly related to treatment, such as hospitalization, surgery, medication, rehab, and medical equipment. The insurance payout directly goes to the health-care provider or reimburses the insured for their out-of-pocket expenses.

Critical illness insurance is a cash benefit paid directly to you. You can use it toward medical expenses, to take time off work to recover, to pay your mortgage, or to hire a babysitter to look after your kids when you need a nap. How you use the payout is entirely at your discretion.

How is critical illness insurance different from life insurance?

Life insurance and critical illness insurance are two different things. Critical illness insurance pays out when you’re diagnosed with a serious illness and need financial support. Life insurance only pays out a benefit to your estate or listed beneficiary/beneficiaries if/when you pass away.

Can my premiums increase over time?

They might. Renewable policies adjust the premium based on your age or health status. That said, some policies have fixed premiums (meaning, they don’t increase) for a certain period or even for the policy’s duration.

Is critical illness insurance expensive?

The cost depends on many factors, from the policy you choose and the level of coverage you need to personal information, such as age, assigned sex at birth, health status, and whether or not you smoke. Generally speaking, you’ll pay less for critical illness insurance if you’re young, healthy, and nicotine-free.

No one wants to imagine being diagnosed with a serious illness. But if you’re a primary breadwinner, parent, business owner, or someone with responsibilities, it’s the “worst-case- scenario” thinking that’s worth doing. Many Canadians will experience (life-threatening) cancer, a heart attack, a stroke, organ failure, or dementia at some point in their lives. If you’re one of them, will you have a plan? Book an appointment with your insurance advisor now to discuss your options.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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In the event that something happens to you, a solid life insurance policy can give your loved ones some financial security by providing a death benefit that’s paid to your beneficiary or estate. The payout amount can be used to cover funeral expenses, pay off debt you leave behind, supplement income, or help provide for other needs. In most cases, the death benefit is tax free; however, occasionally, taxes are owed. Here’s what you need to know about life insurance payouts and taxation in Canada.

Key Takeaways

  • A life insurance beneficiary is the person or entity who will receive your death benefit if you pass away. You can name multiple beneficiaries.
  • Your beneficiaries will each receive a portion of your death benefit as a tax-free lump sum.
  • If you don’t name a beneficiary, your estate will automatically become the beneficiary in the event of your death and the death benefit will be subject to estate
  • There are other instances where a life insurance policy may be taxable in Canada, such as when you withdraw from the cash value of a permanent policy or you sell or cancel a permanent policy.
  • If you or your beneficiaries owe tax on life insurance policy payouts, the insurance company will send out a T5 slip.

What is a life insurance beneficiary?

A life insurance beneficiary is the person, people, or entity that will “benefit” from your life insurance payout, called a “death benefit,” if you pass away. Ideally, you’ll appoint a beneficiary on your policy to simplify the settlement process after your death and eliminate extra fees and potential taxes. Your beneficiary can be a spouse, child, other family member, friend, or even a charitable organization, trust, or business. You can list multiple beneficiaries.

If you pass away and you haven’t assigned one or more beneficiaries, your estate will automatically become the beneficiary of your life insurance policy and the amount will be distributed according to the terms in your will. The death benefit will then be subject to estate taxes. Creditors can also claim it to pay off any of your outstanding debts.

Is life insurance taxable in Canada?

You may be worried that any loved ones you’ve listed as beneficiaries will be forced to report and pay taxes on the death benefit from your life insurance. Luckily, that’s not the case. Most financial gifts and inheritances, including those from a life insurance policy, are not considered taxable income in Canada. Read on for instances where this isn’t the case.

When a life insurance taxable event can occur

Certain types of permanent life insurance have a cash value that accumulates from a portion of the premiums you pay. This cash value will grow based on a set formula or may be invested so it can earn interest. Taxes are deferred on this growth while the policy is in effect unless it exceeds government limits. If you withdraw from the cash value or cancel your policy (known as “surrender”) in exchange for the cash value, you may be subject to taxes or fees (known as a “surrender charge”).

If you pass away and your beneficiaries receive a payout, the interest earned on your policy will likely be taxed as income.

If your estate is the beneficiary of your death benefit, either by default or because that’s how you chose to set up your life insurance, it will owe estate taxes on the amount. The estate itself is responsible for paying those taxes to the government, not the individual person or people listed in the will.

Here’s a summary of when a life insurance policy payout is taxable in Canada:

  1. You do not name a beneficiary in your life insurance policy: In this case, your estate will become the default beneficiary and will owe estate taxes to the government on the amount of the death benefit.
  2. You withdraw from the cash value of a permanent life insurance policy: The cash value of your policy is tax deferrable within certain limits while it remains in your policy. If you withdraw a portion of the cash value, you will likely owe some tax.
  3. You cancel your permanent policy: If you cash out (a.k.a. surrender) a life insurance policy that was supposed to last for your entire life, some of that money may be taxable.
  4. Your beneficiaries get interest earnings from your policy: In addition to the death benefit, your beneficiaries may receive interest from the cash value of your policy. If they do, it will likely be taxed as income.
  5. You sell your permanent life insurance policy while you’re still alive: If your insurance provider allows policy holders to sell their policies and you live in a province, like Quebec or Saskatchewan, where it’s legal, the amount you receive in payment may be taxed as income.

Tax reporting rules for life insurance payouts

In most cases, beneficiaries who receive a life insurance payout don’t need to report it to the Canada Revenue Agency because it doesn’t count as taxable income.

However, if the policy has earned interest or dividends that do owe tax, the insurance company will send beneficiaries a T5 slip that lists the investment income they need to report to the government. Those earnings must be reported on line 12100 of that year’s tax return.

If you surrender your own policy for its cash value, you may need to report it on line 12100 of your own income tax filing. Your insurance company will send you a T5 slip if that’s the case.

How to make life insurance easy for your beneficiaries

With a little planning, you can make things simpler for your beneficiaries. Here’s what you need to do:

  1. Name your beneficiaries in your policy so the death benefit doesn’t get directed to your estate. It could also speed up the settlement process if you pass away.
  2. Keep your beneficiaries in the loop. They should know that they’ve been named.
  3. Keep a written record of your policy and track any updates.
  4. Name your secondary or contingent beneficiaries, too, in case any of your primary beneficiaries pass away before you. That way, the death benefit will remain tax free.
  5. If you experience any major life changes, including marriage or divorce, the birth of a child, the loss of a loved one, retirement, change of health, the purchase of a new home, or the launch of a business, consider updating your life insurance policy.

Additional FAQs

Is the cash surrender value of life insurance taxable in Canada?

It may be. If you cancel your life insurance policy, any cash value amount you receive that exceeds the total premiums you paid is considered a taxable gain. It will be subject to your marginal tax rate on your income tax report.

Is the Canada Pension Plan death benefit taxable in Canada?

Yes. The one-time payout, which is available to the estate or beneficiary of qualifying CPP contributors, is considered taxable income.

Is life insurance tax deductible in Canada?

In most cases, life insurance premiums are not tax deductible. There are a few exceptions, like if you’re a business owner and pay premiums for your employees. No matter what your situation, make sure you chat with your RBC Insurance advisor to get clarification.

In short, life insurance shouldn’t be a complicated part of your financial plan. Speak with an RBC life insurance advisor or call us at 1-866-223-7113 if you’re in doubt about how much coverage you need or whether any portion of your policy may be taxable.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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TORONTO, October 31, 2024 — RBC Insurance has been selected to participate in a $1.5 billion pension risk transfer transaction with IBM Canada Ltd. (IBM Canada), the second-largest pension risk transfer ever in the Canadian market. Under the terms of the agreement, RBC Insurance and Brookfield Annuity Company will each insure 25 per cent and 75 per cent, respectively, of the pension benefit payments for each of the approximately 6,000 plan participants and beneficiaries included in the transaction.

RBC Insurance will act as the lead administrator in providing protected retirement income payments to this full population of retirees and their beneficiaries included in the transaction beginning May 1, 2025. Brookfield Annuity will settle the liabilities under its group annuity contract directly with RBC Insurance.

“RBC Insurance is proud to partner with IBM Canada, offering our financial strength, stability and client-focused approach to safeguarding Canadians’ path to a healthy and comfortable retirement,” said Abid Kazmi, Vice President Longevity Solutions, RBC Insurance. “We’re committed to ensuring the retirement income they worked hard to earn is protected.”

RBC Insurance Group Annuity delivers retirement security to defined benefit pension plan members. With a commitment to best-in-class service, RBC Insurance provides plan sponsors with the stability of a risk management solution dedicated to their needs and backed by RBC’s purpose-driven, principles-led approach to delivering leading performance. RBC is the only global systemically important bank operating in the Canadian pension risk transfer market.

About RBC Insurance
RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth, group benefits, annuities and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, Canada’s biggest bank and one of the largest in the world, based on market capitalization. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with 2,700 employees who serve nearly 5 million clients globally.

  • Coverage gap: Over one-quarter of working Canadians (26 per cent) do not, or are unsure if they have employer-provided benefits
  • Knowledge gap: Nearly one-quarter (24 per cent) of employees with employer-provided benefits admit they do not know much about their coverage
  • Engagement gap: Only 5 per cent of those with employer-provided benefits (either through their employer or spouse’s employer) turn to them as their ‘go-to’ support with well-being needs

TORONTO, Sept. 10, 2024 – With rising economic pressures leading to a myriad of stressors, a recent survey from RBC Insurance finds that working Canadians are feeling the negative impact on their overall well-being, starting with declining perceptions of mental health (57 per cent), job satisfaction (55 per cent), and financial health (44 per cent), each down 5 points since 2023. Yet as the cost-of-living soars, many are not turning to – or are even unaware of – their employer-provided benefits plans, which can provide a financial safety net to access much-needed services.

Among those who have employer-provided benefits, nearly one-quarter (24 per cent) admit they do not know much about their coverage. A mere five per cent of those with employer-provided benefits turn to them as their ‘go-to’ for help or support with well-being needs. Over a quarter (26 per cent) of working Canadians either do not have or are unsure if they have employer-provided benefits.

“These findings emphasize the need for employers to take a more proactive approach in educating their employees about the supports available to them through their employee benefits programs,” said Andrejka Massicotte, head of Group Benefits, RBC Insurance. “In today’s challenging economic environment, it’s essential for Canadians to fully understand and access their existing employer-provided benefits, which can significantly support their financial and overall health and well-being needs.”

Affordability and impacts to well-being
The survey reveals a disconnect between the availability of and engagement with benefits programs as a tool to support both financial and overall well-being. Among the factors impacting their well-being, working Canadians are struggling most with financial security (56 per cent), followed by sleep quality (50 per cent) and physical fitness (39 per cent).

In addition, more than half (52 per cent) of working Canadians report that they or their spouse are contending with at least one mental or physical health condition. Of these, 30 per cent reported a mental health-related disability, indicating the need for accessible and effective mental health support within employer-provided benefits plans.

Barriers to well-being
While virtually all working Canadians say they need to improve their health and well-being, with physical and financial fitness leading as the areas requiring attention, they cite several barriers to actually doing so. The findings show that once again, affordability is a top barrier to improving well-being for 54 per cent of working Canadians, followed by lack of motivation (35 per cent), busy schedules (33 per cent), mental health (25 per cent) and long working hours (19 per cent).

Additionally, many are either uncertain about where to start (17 per cent) and/or lack access to resources (15 per cent) that could help improve their well-being. Women are more likely to list affordability issues (59 per cent), motivation (39 per cent), and mental health (31 per cent) as barriers, compared to men.

“This disconnect points to a critical opportunity for employers and insurers to better educate and engage employees, showing them the value-added services they may already have access to, that can assist with addressing various aspects of their well-being,” adds Massicotte. “Employers should look to improve communication around benefits, work with their benefits provider to offer more personalized solutions, and make it easier for employees to access the support they need, when they need it.”

To learn more, visit rbcinsurance.com/group-benefits.

About the RBC Insurance Survey
These are some of the findings from an Ipsos poll conducted on behalf of RBC Insurance. For this survey, a sample of 1,000 working Canadians ages 18-65 were surveyed between July 5 to 9, 2024. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within ± 3.8 percentage points, 19 times out of 20, of what the results would have been had the entire population of working adults aged 18-65 in Canada been surveyed. Credibility intervals will be wider for smaller subsets of the population.

About RBC Insurance
RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth, group benefits, annuities and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, Canada’s biggest bank and one of the largest in the world, based on market capitalization. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with 2,600 employees who serve 4.8 million clients globally.

Media contact

Cody Medwechuk, RBC Insurance Corporate Communications

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Talking to your family about life insurance now helps to ensure the legacy you wish to leave them will be carried out in the future. It’s an important conversation that will enable you to support your loved ones financially, even after you’re gone.

As the baby boomer generation in Canada makes plans to distribute their wealth among their children, grandchildren, and other individuals and organizations they care about, it’s estimated that $1 trillion will be transferred to their heirs over the decade between 2016 and 2026. Life insurance is one option Canadians use to transfer this wealth, according to their wishes. Many policyholders, however, aren’t sure how to talk about their life insurance policy with their loved ones.

Providing information and instructions to your beneficiaries about your life insurance policy in advance will make it easier for them to understand your intentions and carry out your wishes for your estate and your legacy.

Key takeways

  • Your life insurance beneficiary or beneficiaries will need to access key information to make a claim against your life insurance policy and claim the death benefit.

  • Conversations about death and money are hard to navigate, but the benefits of addressing these topics are worth it.

  • Your loved ones may be uncomfortable with the topic and unfamiliar with insurance industry terms. It’s a good idea to come to these talks prepared with key information and explanations.

How to talk to your family about life insurance

Many people view their finances (including life insurance and estate information) as private subjects not to be discussed openly, even with loved ones. About four in 10 Canadians over the age of 55 say they’re not comfortable having open conversations with their families, but there are benefits to sharing your estate plans (including tax protection and maximizing the value of your loved ones’ inheritance).

Begin by keeping the conversation simple and straightforward. Maintain a focus on the topic at hand, sharing the necessary details such as which provider you’ve chosen for your policy and the name of your insurance and/or financial advisor.

Avoid getting “lost in the weeds” with information that could feel like too much. For example, it’s important for your beneficiaries to know that a life insurance policy payout isn’t taxed, but it isn’t as critical for them to understand the current dividend scale interest rate tied to the policy.

Here are some ways to start the conversation with your family:

  • Reference an article you’ve read about the importance of open communication in estate planning.

  • Kick off the conversation with a question. For example: “Do you have investment or savings goals in mind for the money I’ve set aside for you in my will?”

  • Start with an explanation of why it’s important to you to know your family will be taken care of in the future and then list the steps you’ve taken to ensure they are.

  • Reference current events (for example, the COVID-19 pandemic) and explain how they’ve motivated you to thoroughly organize your estate.

Enter this discussion with an abundance of patience and sensitivity, and prepare ahead of time, so you have the information (such as policy numbers) at your fingertips. Be ready not only to speak, but also to listen.

Talk about the beneficiary or beneficiaries of the life insurance policy

This may be the first conversation some of your loved ones have had about your estate planning and life insurance policies, and so you may need to explain some of the central terms and how they fit into the larger picture.

For example, what is a life insurance beneficiary or beneficiaries? In relation to life insurance, a beneficiary is the person (or people, organization, or charity ) chosen to receive the policy death benefit. People often choose to have more than one beneficiary, and there are a few different types of beneficiaries as well. A primary beneficiary is the first in line to receive the death benefit; however, you might also want to name a contingent or secondary beneficiary (especially if your primary beneficiary is just one person). In the event that your primary beneficiary passes away before you do, the death benefit will be paid out to the contingent beneficiary or beneficiaries.

Talking to your family about who your beneficiaries are (whether that’s your spouse/partner, your children and grandchildren, or a charity that’s meaningful to you) will help them to understand your plans, reasoning, and intentions for this part of your estate.

Having a conversation today will greatly reduce the possibility of unpleasant or confusing surprises in the future.

What happens to your life insurance policy after you die?

If you’ve named a life insurance beneficiary or beneficiaries and equipped them with the information they need, the process of making a claim on your life insurance policy should be straightforward when you pass away. Once the claim is made, the process of paying out the death benefit can begin.

To make a claim, your beneficiary will need:

  • Your policy number

  • A copy of your death certificate

  • A completed claim form

The time it takes for a life insurance policy death benefit to be paid out can vary. In Canada, beneficiaries can typically wait between 30 and 60 days, but under certain circumstances, payouts could take less or more time.

Advise your family on who is helping you with your estate

In addition to your insurance advisor (who can step in to assist your beneficiaries in making their claim), you may have other estate planning professionals helping to guide you. Their name, role, and contact details should be shared with your beneficiaries.

Other professionals to include are:

  • Your lawyer, who will know and understand the content of your will, including your estate plan and other legal details.

  • Your financial advisor, who may be able to support your beneficiary or beneficiaries in deciding where and how to invest the death benefit they receive.

  • Your accountant, who can inform your beneficiary or beneficiaries of the tax implications and cost of transferring your estate.

If you have any additional professionals who are currently working with you to help manage your estate, it’s wise to include their information as well.

Share a copy of your life insurance policy

Conversations about estate planning can be tricky to navigate. They involve a lot of emotion and a lot of information—the kind that may be unfamiliar to you and your loved ones. A reference document containing key contact information and instructions regarding your estate will be a valuable reference tool to leave for them. Your beneficiaries will also need a copy of your life insurance policy on hand when it’s time to make their claim, and it may also be helpful for your family to have a copy to review at their own pace, when they feel ready.

An RBC Insurance Advisor can help you protect your loved ones with the right life insurance coverage. Connect with us today to learn how.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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According to a recent survey by RBC Insurance, Canadians with employee benefits through a group insurance plan experience far greater financial health and mental well-being than those without.

“Knowing that you and your family are covered through your workplace benefits if an unforeseen event were to happen can greatly enhance feelings of overall well-being,” says Andrejka Massicotte, head of group benefits at RBC Insurance. “There’s an invaluable peace of mind that comes from knowing that you can access and benefit from health and wellness supports without having to worry about how to afford that care.”

Read on to learn why group insurance through your employer is a valuable benefit and how to maximize your coverage.

Key takeaways

  • “Group benefits” refers to insurance that’s provided to a group of people, typically by an employer to its employees.

  • Your employer may cover some or all of your premium, meaning you’ll likely pay less for this type of insurance than you would for an individual plan.

  • Group insurance may provide a variety of coverage: life insurance, disability insurance, extended health and dental benefits, accident insurance, virtual support, and more.

  • If your family has access to multiple group plans, you’ll also want to coordinate coverage with your spouse or common-law partner.

  • If your family has access to multiple group plans, you’ll also want to coordinate coverage with your spouse or common-law partner.

What are group benefits?

Also known as “employee benefits,” “workplace benefits,” or “group insurance,” “group benefits” are insurance and well-being offerings provided to groups of people, like a company’s employees. These plans may include life, accident, disability and critical-illness insurance as well as health products and services not included in provincial health care. These services can range from dental and eye care to prescription drugs, massages, and more.

Unlike individual insurance you might purchase on your own, group insurance benefits are provided by your employer, who may pay for some or all of their cost. Group benefits are often part of a total compensation package, which might also include things like RRSP matching, paid vacation and sick days, bonuses, and stock options.

Group insurance coverage typically has lower premiums than individual coverage. The eligibility criteria also tends to be less rigid.

How do group benefits work?

For you to enjoy the perks of group benefits, your employer will have to sponsor a plan from a provider like RBC Insurance. If your employer already has a group plan when you’re hired or introduces a new one during your employment, here’s what you can expect:

  • The choice to opt in or out: Some plans provide the same level of coverage to all employees, while others allow selection.You may be able to choose which benefits you want to opt into or what coverage level you require.

  • Premium-cost-sharing: Most of the time, your employer will pay part of your premium and you will pay the rest, with the amount being deducted from your paycheque. In some instances, the employer will pay the entire premium.

  • The chance to review coverage periodically: You may be able to review your coverage and make changes at various points in time (for example, every year or every two years). Note that premiums on group plans are subject to change.

What do group benefits cover?

Each group insurance plan is unique, so the benefits will depend on the employer and its insurance provider. Here are some typical elements of a group plan:

Life, accident, disability, and critical-illness insurance

Your group benefits package may include coverage for you and your family members in the case of unexpected illness, disability, dismemberment, or death.

  • Life insurance: In the event of your death, this type of insurance provides a lump sum “death benefit” to help your family cover funeral expenses, debts, living expenses, etc.

  • Accidental death and dismemberment (AD&D) insurance: Not a replacement for traditional life insurance, AD&D insurance provides coverage in the case of an accident (say, a workplace incident, traffic collision, drowning, or fall) that results in death or dismemberment.

  • Short-term and long-term disability insurance: If you become ill or injured and cannot work for a period of time, disability insurance provides a monthly payout equal to a portion of your regular income—generally between 60 and 85 per cent—provided you meet the plan requirements.

  • Critical-illness insurance: If you receive a life-altering diagnosis, such as cancer, stroke, heart attack, or dementia, this insurance provides a lump sum to help cover treatments, home or lifestyle alterations, and loss of income.

Health and dental

Your group health insurance can help supplement your provincial health coverage. Your group plan may offer coverage in the following areas:

  • Prescription drugs

  • Dental care

  • Eye exams and eyeglasses

  • Paramedical services, such as massage, physiotherapy, and nutrition coaching

  • Mental-health services

  • Out-of-province or out-of-country emergency medical care or travel expenses

  • Health-spending accounts (to cover eligible health and dental expenses not reimbursed by the plan)

  • Wellness-spending accounts (to cover things like a gym membership, sports equipment, supplements, and fitness trackers)

Some of these benefits may even extend to your eligible partner and/or dependent children.

Virtual services

Your physical and mental health are priorities, but in-person medical appointments, therapy sessions, and prescription pick-ups take valuable time. (Plus, appointments can sometimes be hard to get!) Your group benefits might offer some of these virtual services so you can take care of your health quickly and easily:

  • Employee-assistance program for accessing short-term counselling, among other services

  • Virtual mental-health and wellness programs

  • Virtual services to help with chronic-disease management

  • On-demand access to doctors and specialists who can diagnose health issues, write prescriptions, order diagnostic tests, and provide referrals

How do I make the most of my employee benefits?

There are a few ways you can make your employment benefits work at maximum capacity:

  • Understand your coverage needs: Your group plan may offer multiple types of coverage. Learn what each type includes, and choose the benefits that work best for you and/or your partner and children. Speak to your plan administrator if you have any questions.

  • Know your plan maximums: You don’t want to leave money on the table, but you also don’t want to overspend if you can avoid it. Make sure you know how much money you can claim in each area: dental, eye care, paramedical services, and more. Also be aware of whether—and how frequently—these limits reset.

  • Keep your reset date in mind: Know when your benefits reset! If it’s once a year on January 1, make sure you submit all your eligible expenses for the year by that date. Some benefits, like eyeglasses coverage, may reset every two years.

  • Coordinate coverage with your partner: If you have a spouse or common-law partner, you may be able to benefit from each other’s group insurance plans. If your insurance doesn’t cover certain areas, your partner’s plan may be able to top yours up and vice versa.

You’ll be able to make the most of your employment benefits by carefully considering all your options, familiarizing yourself with your coverage, and keeping an open line of communication with your plan administrator. You’ll also be more likely to reap the rewards of physical and financial well-being.

Visit Group Benefits – RBC Insurance to learn more about RBC Insurance Group Benefits Solutions.

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Your home is your private oasis. It’s a place that houses you and your family and stores all the precious belongings you’ve collected over the years. But life happens. Unexpected events can damage your home and its contents, from fires and storms to theft and vandalism. Thankfully, your home, condo, or tenant insurance includes coverage for your contents and protects some of your possessions, such as furniture, appliances, electronics, and clothing. However, this type of insurance has its limits. Read on to better understand what types of personal property insurance your policy provides, and when you might want to buy additional coverage.

Key takeaways

  • You’ll want to understand your personal home insurance policy to properly insure your personal belongings in Canada.

  • Most home insurance policies will protect some of your personal belongings in the event of theft or damage caused by specific unexpected events, such as a fire or vandalism.

  • Your coverage will have limits, and you may want to consider additional options available for big-ticket items, such as fine art, antiques, jewelry, or collectibles.

  • You may have the option to insure some high-value items separately that exceed policy limits.

  • You may be able to purchase additional coverage for certain events, such as earthquakes. However, some circumstances, such as coastal floods, aren’t covered, and there are usually no options to purchase coverage.

What personal property is covered by home insurance in the event of a claim?

Insurance for your home (whether you own a home or a condo, or are a tenant) will cover a pretty wide range of personal belongings, as listed below. Remember that you’ll likely have to pay a deductible out of pocket for each claim before your policy will compensate you for your loss. The standard deductible is $1,000 for the most common types of claims, but will vary.

Furniture and appliances

Your personal home insurance policy protects your essential furniture and appliances against fire, most thefts, and vandalism. Whether you need to repair or replace a sofa, dining room set, bed, or an appliance, such as a fridge, washer, or dryer, your policy will reimburse you within specified limits following a covered loss.

If you are a renter, your tenant policy will only provide coverage for the items you own. Any damaged items included in your rental or owned by your landlord would fall under the landlord’s insurance policy. Your landlord’s insurance does not provide coverage for your (the tenant’s) personal belongings.

Electronics and gadgets

Your home insurance policy covers items such as televisions, computers, laptops, smartphones, and audio systems that you have for personal use.

Clothing and jewelry

If your clothing and/or jewelry is stolen or damaged by a covered incident (such as a fire), your policy will provide compensation up to the specified limit if the amount exceeds your deductible. For example, through RBC Insurance, coverage is available for jewelry, watches, gems, and furs. Limits and extensions for coverage vary across Canada. If you own high-value jewelry or handbags, consider looking into extra endorsements or riders to protect your assets.

Some collectibles and art

Policies vary widely for collectibles and art, so check with your insurance provider to see what’s covered and what isn’t. For example, home insurance through RBC Insurance can specifically cover sports cards, sports memorabilia, manuscripts, and stamp and coin collections, and wine or spirits on your premises are protected.

Works of art, from paintings and sculptures to handmade rugs and antiques, might also be covered under your home insurance policy. Refer to your policy documents, as coverage limits can vary. The insurance company may require appraisals for some items or collections before approving the coverage to your policy.

Sometimes, a collection may be worth much more than the face value of its individual items. For example, you might have 10 baseball cards worth $30 each (for a total of $300), but sold all together, they might be worth $2,000. However, your policy might only compensate you for the purchase of 10 new $30 baseball cards, not the remaining $1,700 value of the collection. In this case, you’d want to consider “scheduling” the baseball cards for their value, which means individually listing them on your policy and then purchasing adequate coverage.

Renewable energy equipment

If your home features renewable energy equipment (think solar panels or a geothermal HVAC), it’s typically covered by home insurance. However, the equipment is only insurable by its owner.

Spoiled food

If a power outage spoils the food in your fridge and/or freezer, your home insurance may pay you to replace the items. You’ll have to check what types of power outages are covered by your policy, as well as what the reimbursement limits are, and if you’ll have to pay a deductible.

Door locks

If your house keys are lost or stolen, your home insurance will likely reimburse you for the cost of replacing your door locks up to your insured limit.

A child, parent, or dependent’s belongings

When insured through RBC Insurance, any personal property your dependent takes to school or brings to their dorm room or rental when attending boarding school, college, or university is covered up to a specified limit, as long as they haven’t moved out permanently. However, it’s a good idea for students to buy tenant protection coverage, sometimes called “renter’s insurance.”

If you have legal custody of someone, whether they’re a parent, sibling, or a child who is living with a physical or mental disability and lives in a nursing home or a care facility, their personal property is covered up to specified limits

Bicycles and e-bikes

In many cases, a damaged or stolen bicycle or e-bike will be covered up to a limit, even when your bicycle/e-bike is temporarily parked away from home. Through RBC Insurance, you may have coverage for each bike, tricycle, unicycle, or e-bike and its accessories and/or equipment.

Items stolen from your car

Personal property stolen from inside or on your car will typically be covered, even if the vehicle is not parked on your premises. Still, your coverage may be subject to monetary limits, a deductible, or other conditions. The car itself will not be covered by home insurance; it’s covered by your separate car insurance.

What personal property may not be covered by home insurance?

Basic home insurance won’t necessarily cover every item in your home or every type of damage. You may want to purchase specialized property insurance coverage in some instances listed below.

High-value items

Do you have fine art, antiques, jewelry, designer handbags, or collectibles worth a small fortune? Your home insurance policy has maximum coverage limits for these types of belongings, which may not be enough to cover their worth in case of damage or theft. Speak with an insurance advisor to see whether purchasing additional coverage will protect these items properly.

Home-based business equipment

A standard home insurance policy might not provide adequate coverage if you run a business from home and have extensive equipment or inventory. The insurance company may need to do a review to properly evaluate the risk involved before providing an insurance policy. For many small home-based businesses, a standard home policy only provides limited coverage, such as books, tools, and instruments, and only while on the property. Speak to an REC Insurance Advisor to determine if your home-based business assets are covered under a standard home insurance policy.

How can you ensure your personal property is covered sufficiently?

Take these four steps to protect your possessions:

  • Keep an inventory of your belongings and update it at least once a year. This inventory should be stored securely and include photos or videos of your possessions, as well as serial numbers and/or receipts (particularly for big-ticket items). A record will make the claims process easier.

  • Read and understand your home insurance policy’s coverage limits. An RBC Insurance Advisor will gladly help you if you’re uncertain about anything.

  • Know that you will be reimbursed differently by different policies: either with the actual cash value or the replacement cost. In the case of an eight-year-old refrigerator, depreciation would be considered as part of the cash value, and so you would only be reimbursed for the cost of a similar eight-year-old refrigerator. Replacement costs would cover you when you buy a new refrigerator of a similar kind and quality. It’s up to you to select the type of coverage that suits you best.

  • Consider buying separate endorsements or additional coverage, if your policy has limits or exclusions for items you own. It can help to ensure you’ll receive the item’s full value, not just the cost to replace it with something similar but less expensive.

Call an RBC Insurance Advisor today to learn more about home insurance, or to determine whether your personal property is sufficiently covered.

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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