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Receiving a diagnosis of a serious illness like cancer is life-changing. While your health is the priority, if you’re like most people, worries over money and ensuring you can pay your bills while undergoing treatment compound concerns about your prognosis and what the future holds.
Critical illness insurance is one option for filling the financial gaps created by a severe health condition. When purchasing this coverage in addition to your health and life insurance policies, you can access cash to cover expenses while you receive treatment and cannot work. Our guide explains the basics of these policies, what they cover, how they differ from health insurance, and how to purchase one as part of your financial wellness plan.
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According to the National Cancer Institute, the average cost to treat cancer is about $150,000. The price tag of treating cardiovascular disease, including heart attacks, can reach well over $300,000.
These figures only represent the costs of actual medical care, including surgeries, hospital stays, medication, etc. What they don’t take into account are the associated costs of an illness, like time away from work, transportation, and other household expenses. And while health insurance will cover a significant portion of the treatment costs, you’ll likely have to pay a deductible and co-payments before that coverage kicks in, which can mean shelling out thousands of dollars.
Critical illness insurance helps fill that gap. It doesn’t pay for direct medical expenses but instead pays you a lump sum when you receive a diagnosis of a severe illness that you can use however you wish. Most policies pay up to $50,000.
This serious ailment coverage aims to provide a financial safety net if you get sick. Medical debt is one of the leading causes of bankruptcy in the U.S., playing a role in more than 60% of filings. It’s not just the cost of care that makes it impossible for families to make ends meet but the fact that paying for life-saving treatment takes such a big bite from the household budget that it’s difficult or impossible to keep up with other bills.
When you receive a payment for critical disease coverage, you can use it for:
In short, you can use the one-time payout from a critical illness policy however you wish. It’s important to note that the policy is not a substitute for health insurance since the cost to treat a covered condition will likely exceed the value of the policy. You can also only make one claim on this type of insurance, so once you use the money, your safety net is gone.
When you purchase severe illness coverage, the policy will pay you if you receive a diagnosis of one of the covered conditions. Policy details vary, but most cover the most common critical illnesses, such as the following:
Sometimes, insurers limit when policyholders can make claims; for example, you may only be able to claim for a cancer diagnosis if your condition is life-threatening. Early-stage, treatable cancers may not be eligible for a critical illness payout.
While you might classify some diseases as serious or critical considering their effect on your life, that doesn’t necessarily mean the insurance company will agree and pay a claim. Some of the diseases that don’t fall under the umbrella of major health condition insurance include:
Critical illness insurance typically does not cover pre-existing conditions, but some policies might offer coverage if it’s been a certain amount of time since your diagnosis.
The major difference between health insurance and life-threatening illness insurance is that health insurance pays only for treatment. Health insurance may also have restrictions on the treatment, such as a network of providers and facilities, coverage limits, and guidelines on what types of treatment it will pay for.
Critical illness insurance can pay for treatment that your health insurance doesn’t cover but can also cover other expenses. Once you receive the lump sum payout, you can use the cash however you want. That can mean covering medical costs or anything else you want to spend the money on.
The other big difference between the two types of insurance coverage is how they handle pre-existing conditions. While critical health crisis protection may not cover a pre-existing condition and can deny a claim based on when you receive a diagnosis, health insurance companies must cover you regardless of pre-existing conditions.
It’s against the law for an insurer to deny health insurance based on your health status. However, it may affect your policy costs, so you can get treatment for a severe illness regardless of when you buy a policy.
It’s also worth noting that critical illness insurance is not a substitute for health insurance. Buying one of these policies does not fulfill your legal obligation to carry a health insurance policy if your state requires it.
While critical illness insurance can help anyone who receives a devastating medical diagnosis, the following should strongly consider investing in one of these affordable products:
Before you shop for a life-threatening illness insurance policy, review what your employer offers. Many companies offer free or low-cost group policy options, and opting in can provide significant financial peace of mind.
Some people add a critical illness protection rider to their life insurance policy. If you are purchasing a whole life policy, a permanent life insurance policy that covers you until you die, you can add this as an option.
When adding a rider, you can file a claim if you receive a diagnosis of a life-threatening condition. For example, if you have a $300,000 life insurance policy with a $30,000 critical illness rider and have a stroke, you can claim a $30,000 payout to help with your care. The insurance company will deduct this amount from your final life insurance payout, meaning your family will only receive $270,000 when you die.
Adding a rider to your life insurance is an excellent way to secure this extra peace of mind without juggling multiple insurance policies, and the cost for the rider might be less than buying two separate policies. However, you cannot add coverage to an existing life insurance policy — it must be a new policy.
If you decide to purchase serious ailment insurance on your own (i.e., not as a life insurance rider or from your employer), the cost of the policy will vary significantly depending on several factors. Most insurance companies will consider your age and overall health status, as well as your gender and location, when quoting a rate.
Your nicotine use also impacts your ability to secure affordable coverage. Smokers pay significantly more than non-smokers for their insurance; in some cases, more than twice as much. You’ll spend much less if you are young and healthy, though.
While critical illness protection can provide a soft place to land if you face a severe medical issue, if the policies are too expensive or otherwise not a good fit, you can consider other types of supplemental or secondary coverage, including the following:
Each option provides varying coverage levels and financial protection against large medical expenses. For example, hospital indemnity insurance will help cover the costs of a hospital stay if you exceed the allowance of your health plan, but it won’t cover non-medical expenses. Depending on your circumstances, you may want to explore these options in addition to or as an alternative to a critical illness policy.
If you need help comparing your options for critical illness insurance, Insurdinary’s tools make it easy to find answers. Use our convenient online comparison tool to request quotes tailored to your needs from leading insurers, then compare them side by side to find the right policy for you. Our experienced, licensed agents can help you enroll and secure the coverage you need for extra peace of mind.
Do you want more information? Contact Insurdinary today and get help from the experts.