All You Need to Know about Critical Illness Insurance

16 October 2017 |

When a person suffers from a critical illness, it’s difficult to think about how much it will cost, but it is still important to consider. Some individuals need thousands, hundreds of thousands, or even millions of dollars worth of treatment for an unforeseen, serious illness, and as a result, those who hope to get their loved ones this type of treatment often have to file for bankruptcy. According to the American Association for Critical Illness Insurance, an estimated 1.4 million people filed for bankruptcy in 2009, which accounted to about 3 every minute.

Critical Illness Insurance

It’s hard to think about what we will do if we were felled by a severe illness, but it is also important to consider this possibility. When we do so, we can work to prepare for this issue and find help both medical and financial. Critical illness insurance, also called dread disease policy, is a beneficial option to help those who do have to face this eventuality.

What Is Critical Illness Insurance?

Critical illness insurance is a type of financial plan available for purchase. It was developed in the 1990s to help those who suffered from certain critical illnesses. In this event, the insurance company provides a lump-sum payment that is also tax free that the individual can use to cover treatment, necessities, or other financial obligations.

What Constitutes a Critical Illness?

Certain types of illnesses fall under the category of critical illnesses, including

  • Cancer
  • Stroke
  • Heart attack

These first three are the illnesses for which most people want coverage. Other potential illnesses include

  • Organ transplant
  • Kidney failure
  • Coronary bypass surgery
  • Paralysis
  • Angioplasty
  • Loss of limbs
  • Loss of speech
  • Parkinson’s disease
  • Severe burns
  • Multiple sclerosis

Not all policies are the same, and therefore, not every one of these illnesses is covered by every policy.

How Much Does Critical Illness Insurance Cost?

As stated previously, not all types of critical illness insurance are the same. However, individuals can choose to spend certain amounts of money on critical illness insurance in order to receive certain coverage.

A good way to figure out how much you should generally buy is to multiply your monthly mortgage payment by 24. Because these insurance plans allow you to allocate the money as needed, you can choose the best place to put it, and many people want to make sure they can at least keep paying their mortgage while they are being treated.

How Much Does Critical Illness Insurance Pay?

In general, this type of insurance can pay anywhere between $10,000 and $1 million. In most cases, people are given a single payment based on how much insurance they purchased as well as on their diagnosis. Paying for critical illness treatment can be very taxing as well as surprising, and this is the reason why these sums are so high.

How Do I Know I Need Critical Illness Insurance?

Like all types of insurance, you are putting away money for a rainy day by choosing to purchase this option. Still, there are certain individuals who might want to consider purchasing this type of insurance, including those with a family history of any of the disorders mentioned above and those who have a health plan that does not cover any severe medical issues.

How Do I Get Critical Illness Insurance?

Some people purchase critical illness insurance as part of their main insurance plan while others purchase it separately. Depending on your needs and what you want to be covered against, you should be able to find an insurance plan that will offer you the protection you require.

What Should I Consider When Buying Critical Illness Insurance?

If you think you should have critical illness insurance, make sure you make a smart purchase and that you provide yourself with the best outcome possible, should the worst case scenario happen to strike.

  • Do not buy protection outside of your means. It won’t help you to spend more money than you have on critical illness insurance.
  • Work with an agent you trust who has been helping people buy this type of plan for a long time. When you are able to trust your agent, you will know they won’t steer you wrong.
  • You can pair your critical illness insurance plan with another type of insurance plan like a term life insurance plan.
  • People in their 30s, 40s, and 50s often benefit most from this type of plan. These are the individuals who could potentially experience one of the severe conditions listed above but who also do not tend to have extensive insurance that would cover all the costs of care.