July 12, 2022

6 health insurance mistakes to avoid

By Kristen Mayne

Protect yourself from common health insurance mistakes with these tips from a financial advisor. 

Having health insurance is essential. While the government and employee benefits may cover some of your needs, not all of them do. Purchasing health insurance is an important step in protecting your finances and your family. It can feel complicated when choosing from the many health insurance plans, including:

Sun Life advisor Seuna Park shares 6 common mistakes to avoid when choosing a health insurance plan.

1. Not knowing what your health insurance plans cover

It’s important to understand: 

  • what each of your policies cover (including your provincial coverage and employee benefits), 
  • when you can use each policy, and 
  • what you may have to pay out-of-pocket – if anything. 

For example, Park says some people think disability insurance covers the cost of treatment. But this type of insurance is for income replacement. “You’ll want to thoroughly review what your health insurance covers and what it doesn’t.”

What are the different types of health insurance?

Learn about the 4 kinds of health insurance Sun Life offers

2. Not having enough health insurance coverage

Maybe a $50,000 critical illness policy is suitable for someone at the beginning of their career, says Park. But that can become outdated. “If you buy a home, get married or have children, your income and budget will change. Be sure to talk to an advisor to figure out the right amount of insurance for your specific circumstances.” You can always add more coverage if and when you need it. 

It’s often a good idea to get coverage while you’re in good health. Getting approval for higher coverage earlier on can help you have peace of mind knowing you don’t need to go through underwriting again -- unless you increase your coverage.

If you own a business, you need business owner insurance to protect your business and income if you’re too sick to work. Thinking about starting a business? There are some questions about your business insurance that you’ll want to ask. 

3. Relying on group insurance coverage only

“People often think there will be sufficient disability and critical illness insurance through their employee benefits. But usually there is no or very little disability or critical illness insurance available. And there is often a waiting period. So be sure to confirm this with your employer.” 
Another downfall of relying on group coverage? If you leave your job, you may lose your life, disability and/or critical illness insurance, says Park. “This means your benefits will change as you change employers. Whereas if you take out an individual plan, you can lock into a rate. Generally, the younger and healthier you are, the lower the cost.” 

Are you leaving your job with Sun Life benefits? 

Learn about Sun Life Choices

4. Thinking long-term care insurance covers only the costs of being in a long-term care facility

You can use long-term care insurance to pay for whatever you need, says Park. “Whether you’re living at home or a nursing home. This includes health-care professionals who are providing care and meal supplements. You can also use the benefit to  pay for your mortgage and living expenses.” 

5. Overlooking critical illness insurance for children 

Premiums on child critical illness insurance (CII) are low and coverage carries into adulthood, says Park. “This means when you transfer the ownership to your child when they’re no longer a minor, they’ll pay a lower rate than if they applied for critical illness insurance as an adult.” 

“If you never make a claim on your policy, some insurers may return some of your premiums,” says Park. “And some plan designs give clients back their paid premiums upon cancellation” she adds. With Sun CII for children, one of the return-of-premium options automatically returns 75% of premiums you’ve paid either: 

  • when your child turns 25 or 
  • on the policy’s 15th anniversary, whichever is later. 

Coverage will continue. And Sun Life returns the rest of the premiums if the policy is cancelled later or expires. (Note that this an optional benefit that you would add when you purchase the policy.) 

6. Not knowing the difference between disability insurance and critical illness insurance

Critical illness insurance is similar to life insurance where you get a lump-sum cash payment,” shares Park. “Whereas disability insurance replaces a portion of your monthly income.”

Another mistake people make is they think they need to tie their critical illness insurance coverage to their income, says Park. “But that’s not the case. You can take out how much you like. It’s to maintain lifestyle in event the event of critical illness. Sun Life has plans available from $25,0000 to $1,000,000.” 

Get health insurance with one of these 3 options

  1. Get a free health insurance quote. Apply for critical illness insurance or personal health insurance online. 
  2. Find an advisor. Talk to a Sun Life advisor who can help you understand your options.  
  3. Apply for Choices insurance. If you’re leaving a workplace insurance plan with any Canadian insurance company, you can apply for Sun Life Choices insurance within 60 days. 

Keep reading:

This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.

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