While no one wants to think that they’ll become seriously ill, having the right insurance can help pay expenses while you deal with the illness. So, what is critical illness insurance, and who can benefit from it? Benzinga will explain that and provide estimates on how much coverage costs so you can see how well it fits into your financial planning.
How Does Critical Illness Insurance Work?
Critical illness insurance works similarly to health insurance. It involves monthly premium payments to continue coverage. If you are diagnosed with a serious illness, the coverage helps pay expenses.
The coverage only pays out for specific medical conditions or injuries. Those will be listed in your policy. Shop various insurance companies to get coverage for the illnesses or ailments you want coverage for. Different insurance companies offer varying coverages.
A big difference between this coverage and health insurance is that critical illness insurance pays out once. And once it pays out, the policy discontinues.
What Is Covered by Critical Care Insurance?
The coverage for critical illnesses will vary based on the insurer. Some of the most commonly covered illnesses or injuries include:
- Alzheimer’s disease
- Cancer (plans are often specific about the type and stage)
- Coma
- Coronary bypass
- End-stage renal failure
- Heart attack
- Loss of speech, hearing or vision
- Multiple sclerosis
- Organ transplants
- Parkinson’s disease
- Paralysis
- Permanent disabilities resulting from injury or illness
- Stroke
- Traumatic head injuries
You’ll see some commonality in these ailments in that they require ongoing medical treatment, which could mean time away from work and large medical bills that would greatly impact a family’s finances. That’s why it’s smart to have insurance to cover these conditions. This insurance is also good for those with high-deductible health plans and who will incur large expenses in the case of a serious illness.
People with a family history of serious illnesses like cancer or heart disease also are good candidates for purchasing this insurance. Consider what conditions could be hereditary and put you at risk. Then ensure you have financial coverage for those ailments.
What Is Not Covered?
Your critical illness insurance won’t cover any ailments that are not outlined in your policy. But some examples of common conditions that you won’t find coverage for include:
- Asthma
- Diabetes
- Noninvasive cancer
- High blood pressure
- Broken bones
- Most types of chronic illnesses
- Injuries you suffer when breaking the law
- Injuries you sustain when under the influence of drugs or alcohol
- War injuries
- Preexisting conditions before you purchased the coverage
How Much Does Critical Care Insurance Cost?
Critical care insurance costs will vary based on a variety of factors.
- Age
- Health history
- Group versus individual plans
- Whether you use nicotine products
- Location
- Gender
- How much coverage you want
Here are the estimated monthly premium rates for a woman from Omaha, Nebraska, who doesn’t use nicotine:
| Female | $25,000 benefit | $50,000 benefit | $75,000 benefit |
| 30 years old | $14 per month | $25 per month | $37 per month |
| 40 years old | $22 per month | $42 per month | $63 per month |
| 50 years old | $37 per month | $71 per month | $106 per month |
Here are the estimated monthly rates for a man from Omaha, Nebraska who doesn’t use nicotine:
| Male | $25,000 benefit | $50,000 benefit | $75,000 benefit |
| 30 years old | $16 per month | $29 per month | $42 per month |
| 40 years old | $27 per month | $53 per month | $78 per month |
| 50 years old | $52 per month | $102 per month | $153 per month |
Pros and Cons of Critical Illness Insurance
Critical illness insurance offers many advantages to help you carry on even while recovering from a serious health condition. It can be the difference in whether you can afford proper medical care or whether your finances suffer from a surprise diagnosis.
Pros
- Financial protection: Ensure that your family’s finances will remain stable no matter the challenges you face.
- Funds for anything: There are no restrictions on how you use the funds once you are diagnosed with a qualifying condition. That means you can use them for groceries or to cover your mortgage. You don’t have to have medical bills that add up to your benefit total to get the payout.
- Reasonable premiums: For the coverage that you receive for the insurance, the premiums are relatively low. For less than $50 per month, you get thousands of dollars in coverage in case of a qualifying illness.
Cons
- Coverage limits are low: Diagnosis with a serious illness can be devastating to your finances. Not only will you have large medical bills, but you might miss work or be unable to work and have increased expenses, such as childcare while you receive treatment. You might be surprised how quickly you go through your plan benefit.
- Preexisting conditions are not covered: If you’ve already had a stroke, you likely won’t be able to seek critical illness coverage in case of another. Or if you’ve had cancer in the past, you can’t seek coverage for a recurrence, in most cases. There are exceptions, but you’ll struggle to get coverage if you have had serious illnesses in the past.
- The older you are, the more expensive the coverage costs: As you age and become more at risk of developing a serious illness, coverage will get costlier. This is especially true if you have average health.
How to Get Critical Illness Insurance
Getting critical illness insurance is simple. Follow these steps to complete your application.
- Shop around to find an insurance company that covers the ailments that matter most to you.
- Apply for coverage by inputting basic details, such as your age and existing conditions
- Answer several questions about your medical history and whether you’ve been diagnosed with any ailments.
- Get a quote for coverage. With companies that offer immediate plans, you can complete the application and pay your first premium. Other companies might require a medical exam and a longer underwriting period.
- Pay your premiums on time to continue coverage.
Compare Critical Illness Insurance Plans
Review these leading critical illness insurance providers to start getting quotes and comparing plans to find the best one for you.
- Best For:Nationwide coveragesecurely through Blue Cross Blue Shield Health Insurance's website
- Best For:No enrollment period health insurancesecurely through Sidecar Health Access Plan's website
Plans referred to above are excepted benefit fixed indemnity insurance products marketed and administered by Sidecar Health Insurance Solutions, LLC and underwritten by Sirius America Insurance Company or United States Fire Insurance Company, depending on the state. As an excepted benefit plan, it does not provide comprehensive/major medical expenses coverage, minimum essential coverage, or essential health benefits. You cannot receive a subsidy (premium tax credit and/or cost-sharing reduction) under the ACA in connection with your purchase of such an excepted benefit fixed indemnity insurance plan. Also, the termination or loss of this policy does not entitle you to a special enrollment period to purchase a health benefit plan that qualifies as minimum essential coverage outside of an open enrollment period. Coverage and plan options may vary or may not be available in all states.
How Does Critical Illness Insurance Work?
Critical illness insurance provides a lump-sum cash benefit if you experience a first-ever diagnosis of a covered condition. Benefit amounts typically range from $5,000 up to $75,000 (although higher amounts may be available) and pay out immediately after a claim is approved. Think of this one-time payment as money to use however you choose in your time of need:
Funds to Carry on Despite an Ailment
You can’t predict whether you’ll face a serious injury or illness. But you can prepare for it with good insurance coverage. Critical illness insurance provides funds to help cover ordinary expenses while you recover and receive treatment. You don’t have to use it on medical bills, but knowing the funds are there in case you need them will provide peace of mind.
Frequently Asked Questions
What is voluntary critical illness insurance?
Voluntary critical illness insurance offers a fixed lump sum if you are diagnosed with a serious illness. You don’t have to show receipts for the value of the benefit or anything outside of your diagnosis.
What is considered a critical illness for insurance?
A critical illness for insurance purposes will vary based on your chosen plan. However, some common examples of illnesses that are covered include Alzheimer’s disease-specific types and stages of cancer, coma, coronary bypass, end-stage renal failure, heart attack, multiple sclerosis, organ transplants, Parkinson’s disease, paralysis, stroke, traumatic head injuries and much more.
Are critical illness insurance payouts taxable?
Whether a critical illness insurance payout is taxable varies based on where you live and how you paid for the insurance. It’s best to consult a financial adviser to know whether your benefit might be taxed.
About Rebekah Brately
Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.