Extra Info Type of coverage

What is Critical Illness Insurance?

Critical Illness Insurance Pays A Lump Sum Cash Benefit When You Are Diagnosed With A Critical Illness

  • In the time it takes you to read this sentence, the bills from a critical illness may have forced yet another American to file for bankruptcy. Some 1.4 million Americans will file for bankruptcy in 2009, which equates to about three every minute.
  • In the late 1990s, a new financial product was developed to help consumers cover expenses associated with critical illness. Appropriately, it's called Critical Illness Insurance.
  • This specialized insurance provides a lump-sum, tax-free payment should a policyholder suffer from certain specific critical conditions. Some 600,000 Americans now have this protection purchased on an individual basis or through a plan offered by their employer.

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What Is A Critical Illness ?

For purposes of this explanation, we are going to list those illnesses that are covered by critical illness insurance policies.

The three primary are: cancer, heart attack and stroke.

Critical illness insurance policies may also cover such conditions as:

  • Heart transplant
  • Coronary bypass surgery
  • Angioplasty
  • Kidney (Renal) failure
  • Major organ transplant
  • Paralysis

Why Was Critical Illness Insurance Created ?

Here is the short answer: Critical illnesses cause financial devastation to millions of individuals and families (even those with health insurance). A product was created that would provide cash at a time it was needed most.

How Much Cash Can I Receive ?

The cash payments which can range from $10,000 to as much as $1 million. They are paid as a single, lump sum payment as soon as the individual is diagnosed with a covered condition.

Some policies will actually provide multiple cash payments. Say you have cancer and survive; you get a cash payment. Three years later, you have a heart attack; another payment. But this varies from insurer to insurer, so be sure to ask if it applies.

Why Would I Need Critical Illness Insurance Benefits ?

  • Cash to pay for medical treatments not covered by your health plan.
  • Cash to pay your mortgage while you are recovering.
  • Cash to pay bills - from car payments to insurance premiums.
  • Cash so you can travel for treatments not available locally.
  • Cash to pay for experimental treatments (not covered).
  • Cash to replace a spouse's income while caring for the insured.

We think you'll find a way to put the cash to good use.

How Much Will I Pay For Critical Illness Insurance ?

May we suggest you use the Cost Calculator contained as part of the Association's Learning Center.

Deciding how much critical illness insurance protection to buy is clearly a personal decision. A simple way to approach the matter is to multiply your monthly mortgage payment by 24 (2 years worth). Imagine the peace of mind of knowing you'll be mortgage-payment free while you recover and undergo treatment.

As an example, you'll see that a male age 40 (non-smoker) seeking a cash benefit payment of $10,000 would pay between $180 and $200-a-year for critical illness insurance. Smokers will pay about 50 percent more. A female age 50, purchasing $20,000 of coverage, will pay about $350 a year. Rates for smokers increase significantly after one reaches age 50.

A number of insurers will issue up to $50,000 or critical illness insurance coverage without a medical exam. Referred to as simplified issue, this is a good way to go for the vast majority of individuals. It is also the most affordable and a good place to start the processing of considering this highly important form of protection.

Are There Different Forms Of Critical Illness Insurance ?

Yes. We'll try to keep it simple.

There is Simplified Issue Individual Protection which typically is available in amounts up to $50,000. Generally insurers will only ask a few health questions with these policies. They tend to be affordable and available from individual insurance professionals.

There are Fully Underwritten Individual Plans which are available in higher amounts; up to $500,000. Medical information will be requested by the insurer. These plans are also available from individual insurance professionals.

There are plans available through employers which are generally offered on a voluntary basis (fully paid by the employee).

There are life insurance policies that offer a critical illness insurance benefit often available as a rider to your policy.

Tips For Buying Critical Illness Insurance Protection

Obviously,l buy only as much protection as you comfortably can afford.

One of the best ideas we've heard is to multiply your monthly mortgage payment by 24 (2 years worth). Imagine the peace of mind of knowing you'll be mortgage-payment free while you recover and undergo treatment.

Finally, costs for coverage can vary from one insurer to another. Therefore it pays to work with a knowledgeable professional who has access to coverage from multiple insurers. he or she can make sure you get the best coverage for the lowest cost.

 
 

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