Critical Illness Insurance for Individuals
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.
We answer the more common questions posed by consumers. If you have a question don't hesitate to call or E-mail the Association's offices. Our goal is to provide the information you need to make an educated decision.
Critical Illness Insurance Information Center
- What Is A Critical Illness ?
- Why Was Critical Illness Insurance Created ?
- Why Would I Need Critical Illness Insurance Benefits ?
- How Much Cash Can I Receive ?
- How Much Will I Pay For Critical Illness Insurance ?
- Are There Different Forms Of Critical Illness Insurance ?
- Tips For Buying Critical Illness Insurance Protection
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
Coronary bypass surgery
Kidney (Renal) failure
Major organ transplant
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.
For those who want a lot more information. Consider the following: Medical problems contributed to over 60 percent of all bankruptcies in the United States and a 2008 Harvard University study found that more than three-quarters (77.9 percent) had health insurance at the start of the bankrupting illness. This study was performed prior to the current economic downturn and will likely understate the current burden of financial suffering.
Critical illnesses are striking more Americans every single year. Some 1.4 million Americans are diagnosed with cancer (American Cancer Society). An estimated 785,000 Americans will have a first heart attack and some 600,000 Americans will experience their first stroke (American Heart Association). The vast majority will survive.
The financial consequences of surviving a critical illness are something few people are prepared for. Most health insurance policies come with deductibles and co-pays that can be as much as $5,000 a year. Prescriptions are not just costly, they are rarely fully covered.
And, here is something you likely have not considered; while you are undergoing treatment or recovering for an extended period of time, you will still have to pay your health insurance premiums. You'll pay insurance, rent or mortgage, credit card bills, school tuition, real estate taxes, food and utilities.
According to the Harvard study, many families with health insurance found themselves under-insured and responsible for thousands of dollars in out-of-pocket costs. The average out-of-pocket cost was $17,749 for all medically bankrupt families. Because most health insurance is linked to employment, a medical event can trigger loss of coverage. For patients who initially had private coverage but lost it, the family's out-of-pocket expenses averaged $22,568.
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.
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.
Want To Know What Critical Illness Insurance Costs ?
If you are ready to find out whether you can health qualify for critical illness insurance and to see what coverage costs start the process. Click here to complete our simple online questionnaire and be connected with an expert in your area there is never any obligation and the information is free.
Want To Learn More About Long-Term Care Insurance ?
The nation's best source for long-term care insurance information. Visit the American Association for Long-Term Care Insurance's Consumer Information Center. Click here for the American Association for Long-Term Care Insurance's Consumer Information Center.