Critical illness insurance is just one form of supplemental insurance many have found beneficial in today’s healthcare marketplace. In the modern healthcare climate, most individuals have become accustomed to a gradual “copay creep” accumulating over the years. This “copay creep” is simply the steady increase in what an individual pays when he or she visits the doctor under one’s health insurance plan. Each and every year this amount seems to rise just a bit. And that’s not the only rise individual and families are seen within the healthcare industry. Premiums are continually rising as well. With tiered plans introduced by the Affordable Care Act making their way into individual and employer managed group plans, there is no end in sight for this trend either. This can cause many to “penny-pinch” when purchasing different forms of insurance. Yet, people should be wary of cutting corners with regards to purchasing critical illness insurance.

What Is Critical Illness Insurance

Critical illness coverage is a form of insurance that typically pays a lump sum amount to individuals and families when someone is diagnosed with a critical illness. Most plans cover a variety of ailments, including heart attack, cancer, stroke and many more. The lump sum payout can be used for whatever the individual or family members would like.

How does critical illness insurance work?

Critical illness insurance will pay you a tax-free lump sum benefit if you contract a critical illness that’s listed on the policy.  Benefits range from a few thousand dollars to $100,000.  This money comes with no strings attached, so you’re free to spend it on whatever you wish.

Most people will choose to spend it on medical care, at-home nursing care, to replace lost income if they’re unable to work, for meals if you’re unable to cook for yourself during recovery, or even to pay off the mortgage.

What is a “critical” illness?

As mentioned before, you’ll only get the payment if you contract a critical illness listed on the policy.  The exact list of qualifying illnesses will vary between insurers, but there are three major critical illnesses that most policies will cover:

  • Cancer
  • Heart attack
  • Stroke

Other critical illnesses can include:

  • Kidney failure
  • Organ transplant
  • Heart valve replacement or coronary bypass
  • Loss of important faculties like blindness, deafness or paralysis
  • Bacterial meningitis
  • Multiple sclerosis

What are the exclusions?

Chronic illnesses or some types of cancers may not be covered.  If you’ve had an illness before and you relapse, depending on the policy, you may not be able to receive a payout (i.e. for a second heart attack).

Exceptions and exclusions vary, so it’s important that you read the policy carefully.

The History Of Critical Illness Insurance

Critical illness coverage was created in South Africa. The coverage was created to provide financial support to individuals in their greatest time of need – when a life-threatening illness rears its ugly head. The plans are quite popular in South Africa, Australia, and New Zealand but have only recently become popular in the United States. While created for the right reasons, critical illness insurance has historically had a pretty bad reputation in the United States. Most policies were created with way too much wiggle room. Wiggle room that allowed insurers off the hook when it came time to pay a claim. Claims were rarely paid, and no statistics were available for potential customers to see. As well, these policies usually only covered advanced stages of cancer – yet insurers would refuse to state this fact up front. Yet, times have thankfully changed. Insurance companies found these policies hard to sell due to the bad reputation. So many insurers have cleaned up their critical illness insurance policies. While insurance companies have cleaned up their act a bit, it’s still important to read the fine print of your policy – your coverage will only extend to the exact illnesses laid out in the policy and none other.

Why You Need Critical Illness Insurance

When you or a loved one (who is covered), are receiving treatment or recovering from a critical illness, you will most likely be facing high out-of-pocket costs from a number of sources. Medical expenses, travel costs and more can add up quickly. This is where critical illness insurance comes in. Instead of having to worry about expenses building you, you’ll be able to focus your attention on recovering or helping your loved one get better because you receive a lump sum cash benefit. Just like most forms of insurance, you’re paying for peace of mind during your time of need. [wpex more=”Read more” less=”Read less”]You want to first check what benefits you receive from work. Most employers offer life insurance, and a few offer critical illness plans. If critical illness coverage is not available through your work, you’ll need to make an informed decision. Often, those with decent disability coverage will not need critical illness insurance. Families and individuals without a good chunk of change saved up should strongly consider critical illness coverage, especially if individuals who are 40+ would be covered. If your employee benefits package doesn’t cover expenses over a period of time off work due to sickness, critical illness plans could help offset costs in light of an illness. Another benefit of critical illness insurance is the flexibility of the lump sum benefits. The money you receive from a critical illness claim is tax-free and can be used any way you desire. You can take time off work, purchase private medical care and more.[/wpex]

The Downside Of Critical Illness Insurance

Critical illness coverage can be great supplemental insurance for many. However, the coverage is not for everyone. Pre-existing conditions and health problems you knew you had before you took out the policy will not be covered by a critical illness plan. If you die quickly from a critical illness, your family’s payout will not come from a critical illness policy. It will come from a life insurance policy. Just like with every insurance policy, you’ll be able to find information specific to your needs by reading the fine print before selecting a policy.

How Much Does Critical Illness Cost

Critical illness insurance varies greatly from individual to individual. Your age, medical history and the amount you’re insured for will determine the cost of the policy. Which illnesses are covered also plays a large role in determining monthly premium pricing. The cheapest policies often have the fewest conditions covered and strict definitions when you place a claim. Most people package critical illness coverage with life insurance to offset costs.

Critical Illness insurance & You

Ultimately, the choice to purchase critical illness insurance comes down to your needs. For someone that has suffered a critical health event, medical insurance rarely covers all the costs. Out-of-pocket costs and travel costs for family members often add up quickly. This is where your critical illness coverage offers peace of mind. Allowing you to use the money to pay off medical debt, cover in home health care, new experimental medical treatments, costs of pharmaceuticals, prolonged recovery times, unexpected expenses and more – critical illness coverage gives you the flexibility to cover your most prudent expense first. If critical illness insurance is of interest to you, it’s best to talk with an insurance specialist. Coverage can be quite complex, and it’s important to educate yourself on the best options for you before choosing a policy.