Peace of mind or playing into fears: Is cancer insurance worth buying?

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People experience any number fears around a possible diagnosis of cancer, but insolvency isn't usually one of them.

But as many current and former patients know, the financial toll from taking time off work for treatment, paying for drugs not covered by public insurance or travelling to seek care can quickly add up. And that means financial stress can even overshadow health concerns for many who have received a life-altering diagnosis.

Insurance companies are now rushing to fill that gap by offering consumers the chance to purchase peace of mind in the event of a cancer diagnosis. But there is also growing debate as to whether a cancer insurance policy offers true protection, or if it is a cleverly disguised cash grab that lures customers by playing to their fears.

Cancer insurance offers lump-sum payments, money in the event of surgery or hospitalization and other payouts to offset the cost of dealing with treatment. BMO Insurance, for instance, is currently marketing a product called Well Woman, which provides a maximum payout of $50,000 to women diagnosed with cancer of the ovaries, cervix, breasts, fallopian tubes, uterus, vagina or vulva. The money can be used for anything, from travelling to see a medical specialist to taking a dream family vacation.

While Well Woman has been around for nearly a decade, BMO has recently renewed the marketing push. And it has been getting a big response from customers, said Rocco Casullo, head of direct-to-consumer insurance at BMO Insurance.

Similarly, IA Excellence, a Quebec-based insurer, offers Cancer Guard, insurance against potentially life-threatening cancers. Broadly, these policies are part of a growing segment of the larger critical-illness insurance market, which offers financial protection in the event of medical issues such as heart attack, stroke or bypass surgery. In many cases, consumers will get their premiums back if they remain cancer- or disease-free for the life of the policy, or by the time they reach a certain age, often 70.

The pitch is often irresistible because it appears to allay our fears with a handy solution, said Glenn Cooke, president of Life Insurance Canada.com Inc. Yet some experts warn that various forms of critical-illness coverage are unnecessary and could even prevent people from getting proper long-term disability coverage.

"[Critical illness insurance] is being sold on rainbows and unicorns," Cooke said. "You should be buying insurance for financial reasons, not for emotional reasons."

Cooke argues that adequate life and disability insurance is enough to cover unexpected events, and that the payouts from critical illness and cancer insurance – often in the range of $25,000 to $200,000 – are actually quite small, considering the enormous costs that can accompany a disease diagnosis. It isn't enough for a person to live on for a long period of time, argues Cooke.

It's not clear what benefit critical-illness insurance offers customers, says Christopher McCabe, Capital Health chair in emergency medicine research and adjunct professor in the economics department at the University of Alberta. For instance, a female who purchases the Well Woman insurance might believe it would cover the cost of any out-of-pocket expenses related to cancer treatment. In reality, "it won't go very far," McCabe said, noting that a number of modern cancer drugs cost well in excess of $50,000.

And if an individual does get diagnosed with cancer or suffer another disease covered by the policy, there's a chance the claim will be rejected because of the terms, restrictions and definitions set out in the policy. Cooke says he has heard that many claims are rejected because an individual's heart attack didn't match the specific terms set out in the policy, for instance.

The growing interest in cancer and critical-illness insurance highlights the serious funding gap that forces many patients into a financial hole, said Lauren Dobson-Hughes, senior manager of public issues with the Canadian Cancer Society. And private insurance is clearly not going to solve that problem for everyone.

"Private insurance is fantastic for people who can afford it," said Dobson-Hughes, but she added: "It means you're saying only those who can afford to buy the care can access it."