What is Critical Illness Insurance?

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An alarming number of Americans are not financially prepared for the diagnosis of an expensive illness. So, what can you do to fill the gaps in your health insurance and protect your personal finances? One viable option is to purchase critical illness insurance, which is a type of supplemental insurance that is designed to help cover costs associated with cancer, heart attack, stroke, and other financially devastating conditions.

Read on to learn more about how critical illness insurance, also known as critical care insurance, works. We’ll go over what it covers, how much it costs, and who needs to consider purchasing a policy.

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Best For
Those with Chronic Conditions
1 Minute Review

Purchasing life insurance requires you to be familiar with essential benefits. Different types of life insurance such as permanent insurance can give you peace of mind because you know your beneficiaries will receive death benefits, regardless of when you die.

For quality life insurance, look at Mutual of Omaha, which offers whole and universal life insurance policies that guarantee coverage for your entire life. A medical exam isn’t required, premiums don’t increase, you can access the cash-value portion of the policy in an emergency, and you can set a death benefit. Below is Benzinga’s list of pros and cons associated with Mutual Omaha life insurance.

Best For
  • Anyone entering their prime earning years
  • Customers willing to take on additional risks with their policy
  • Policies offer financial protection that last throughout your lifetime
  • Policies provide cash value that can be accessed while you are still alive
  • Universal life insurance policies enable you to adjust premium payments and frequency
  • You can decrease or increase the amount of your death benefit
  • Policy options are limited when buying online compared to purchasing through an agent.
Age Requirements
18 – 75
1 Minute Review

Colonial Penn, a subsidiary of CNO Financial Group, Inc. (NYSE: CNO), specializes in simplified- and guaranteed-issue life insurance. Both of these options mean you don’t need a medical exam to get coverage. With some of its policies, you do need to answer a few health questions to be approved. 

Colonial Penn’s most popular product is its guaranteed-issue life insurance. It’s available to people aged 50 and older. You have to wait 2 years to receive the full death benefit, but being able to obtain coverage regardless of your current health status may be worthwhile. 

Colonial Penn has been in business for over 60 years, and it’s licensed to do business in 49 states and D.C. (New York is the exception). While it doesn’t have a mobile app, it does have online chat and account access. It also has extensive customer service hours if you need assistance by phone. 

Overall, Colonial Penn serves a particular need in the insurance market, and it does that well. Its policies have relatively low death benefits (up to $50,000), and its easy application process makes it a good fit for folks who may not be in perfect health or who don’t want to deal with a medical exam. 

Best For
  • Older adults who need final expense coverage
  • Adults concerned about needing funding for a critical illness
  • Offers guaranteed-issue life insurance
  • Offers term and whole life insurance
  • Offers life insurance with an accelerated death benefit
  • 2-year wait for full benefits with guaranteed-issue life insurance
  • No mobile app
Best For
Life insurance as an investment tool
1 Minute Review

AIG Life Insurance is known as one of the biggest insurers in the entire world. Its services are offered to millions of customers throughout more than 80 countries. The agency also provides a wide range of insurance and investment products for businesses. According to Fitch and S&P, an A+ rating best suits AIG Life while an A2 rating from Moody’s alon and an A rating from AM Best perfectly supports just how much of a positive reputation the company radiates overall. AIG Life proves that there is more than term life insurance and the ability to cover everything is possible.


Best For
  • Life insurance as an investment tool
  • Parents, individuals and businesses
  • Anyone in need of several insurance options
  • Unique variants of traditional life insurance policies
  • Variety of term lengths for term life policies
  • Business services offered to help protect your bottom line
  • Multipolicy discounts available
  • Low score for customer satisfaction
  • Unavailable in some states (New York and Maine); some states only available online (Pennsylvania)

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:

  • Cover health insurance deductibles, copays, coinsurance, and out-of-network care
  • Keep up with recurring bills (mortgage, car, childcare) and everyday living expenses
  • Replace lost income from missed work for yourself (or for a spouse that’s by your side)
  • Pay for prescriptions and medical treatments, including experimental treatments that require travel and lodging

When you have critical illness insurance coverage, you can rest easy knowing your policy will help cover various out-of-pocket expenses that your health insurance won’t.

What is Covered by Critical Care Insurance?

To fully understand the protection provided by critical illness insurance, you first have to understand what exactly is considered a “critical illness”.

While the exact list of illnesses will vary across insurance companies, here are ten expensive diagnoses that are often covered by critical illness insurance policies:

  • Cancer
  • Stroke
  • Heart attack
  • Paralysis
  • Coma
  • Kidney failure
  • Major organ transplant
  • Advanced Alzheimer’s Disease
  • Coronary artery bypass surgery
  • Angioplasty

(Be sure to check with your carrier so you fully understand what is and isn’t covered prior to purchasing your policy.)

Suddenly, the value of having this coverage suddenly becomes crystal clear.

If you have a critical illness that costs $90,000, your health insurance will likely cover 80 percent. That means the remaining 20 percent — $18,000 — will be your responsibility. That’s where your critical illness insurance policy comes in.

For example, imagine you have a serious heart condition. According to the American Heart Association, 720,000 Americans suffer a heart attack annually and somebody has a stroke every 40 seconds. The median cost of hospitalization for a heart attack hospitalization is $53,384, whereas a stroke costs $31,218. 

Then there’s cancer. The American Cancer Society states there is a 33 percent chance for both men and women of developing cancer in their lifetimes. Comprehensive cancer care can cost hundreds of thousands of dollars. 

Even a short-term stay in the hospital is capable of causing serious medical debt. HealthCare.gov reports the average cost of a three-day hospital stay is around $30,000.

How Much Does Critical Care Insurance Cost?

Like any other type of type of coverage, the cost of critical illness insurance depends on the level of risk that you, the policyholder, presents to the insurance company. In other words, the younger and healthier you are, the lower your rates will be.

When shopping for critical care insurance, it helps to know that:

  • Cost increases with age and varies by geographic location.
  • Women pay less than men (when all other factors are equal).
  • Nicotine use increases rates.

In addition to various personal factors, your policy choices will also influence your monthly rates. Cost increases as your policy’s benefit amount does. If you opt to select any additional riders, such as a return of premium rider, this will bump up the price as well.

Keeping all of this in mind, 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

Remember, these are just estimates. To see your real rates, you can request a personalized quote online in a matter of seconds. 

Do I Need Critical Care Insurance?

Ultimately, whether or not you need critical illness insurance comes down to your unique personal circumstances. This requires you to ask some difficult questions and closely examine your health and wellness, both physically and financially.

That being said, critical illness insurance is likely a worthwhile investment if:

  • You have a history of cancer or other critical illnesses in your family
  • You have a high-deductible health insurance plan
  • You have limited emergency fund savings

Fortunately, shopping for coverage is incredibly simple. With affordable rates and a fast online application process, Breeze makes it easy to find a personalized critical illness insurance policy — and peace of mind — at a price that works for you. Take a few seconds to get a free critical illness insurance quote from Breeze today.