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What is Critical Illness Insurance and Who Needs It?

sick elderly

You’ve probably never needed Critical Illness Insurance but, in the event of a major health emergency, like cancer, heart attack or stroke, Critical Illness Insurance or Catastrophic Illness Insurance, as it is sometimes referred to, could be the only thing standing between you and financial ruin.

Many people assume that their regular health insurance will cover them in the event of a life-threatening illness, but the exorbitant cost of treatment is usually more than standard plans cover. These days, your odds of surviving a catastrophic illness are significantly higher than they used to be, but the cost of surviving can break the bank. To that end, Critical Illness Insurance was developed in 1996.

Critical illness insurance provides coverage in the event of:

  • Heart Attack
  • Stroke
  • Organ Transplant
  • Cancer
  • Coronary Bypass

It can also cover non-medical costs related to the illness like:

  • Daily Living Expenses
  • Transportation
  • Retrofitting vehicles to carry scooters or wheelchairs
  • Installing lifts in homes
  • Respite Vacations
  • Childcare

How much does Critical Illness Insurance cost?

The price of Critical Illness Insurance depends on several factors including: the gender, age and health of the insured, their family medical history, and the amount and scope of coverage, i.e. the more illnesses the policy covers, the more you’ll pay in premiums.

How can I get Critical Illness Insurance?

Critical Illness Insurance is available as an add-on to some Life Insurance policies, it can be purchased independently, or your employer may offer it as a benefit. Unlike other healthcare benefits, employees typically assume the entire cost of Critical Illness coverage, but part of what makes these policies so appealing is that they tend to be fairly inexpensive, especially when you get them through an employer.

Despite their relatively low price, there is still some skepticism regarding the value that these policies offer. Critical Illness Insurance policies only cover a narrow range of illnesses, they exempt certain cancers and chronic illnesses, they may not be cover you if a disease comes back or if you suffer a second heart attack or stroke, and some coverages can end or be reduced once you reach a certain age.

Like all insurance policies, Critical Illness policies are subject to a variety of stipulations beyond just the specific medical conditions they cover. For example, a diagnosis of cancer only trigger payment if the cancer has spread beyond the initial point of discovery or is life-threatening. Similarly, a diagnosis of stroke may not trigger a payment unless neurological damage persists for more than 30 days.

 

Critical Illness Insurance Alternatives

Alternative forms of coverage can offer similar benefits with far fewer restrictions. Disability insurance, for example, provides income when you are unable to work due to a medical condition, but it is not limited to just a handful of illnesses. A Health Savings Account (HSA) or a Flexible Spending Account (FSA), may also offer an alternative, especially for individuals with high-deductible plans.

The Bottom Line

62% of all bankruptcies in the United States are caused by medical issues. Protecting yourself from financial ruin, in particular if you have a family history of a condition that is covered by Critical Illness Insurance, can provide a great deal of peace of mind for you and your family, but you should discuss your options with a trusted insurance professional before making a coverage decision.

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