Guide to Critical Illness Insurance
Few Americans know about critical illness insurance, but this type of policy could be extremely beneficial for those who want to protect themselves and their families financially in the event of a critical illness diagnosis.The Basics of Critical Illness Insurance
There are a few key takeaways to consider when it comes to critical illness insurance:- Critical illness insurance policies pay out benefits for specific, life-changing medical emergencies.
- Most people will invest in critical illness policies to cover medical costs that are not covered by traditional health insurance, as such policies rarely cover all the costs of medical treatment.
- Critical illness insurance policies are inexpensive and affordable for most individuals and families.
- The benefit received is provided to the beneficiary in cash, so it can be used for whatever the policyholder wants.
- The scope of illnesses that critical illness insurance applies to is very limited. Some insurance companies only consider a handful of illnesses or diseases to be “critical” enough to warrant a benefit payout.
What Is Critical Illness Insurance?
Critical illness insurance is a form of insurance that pays out a lump sum to policyholders after they are diagnosed with what is considered a serious or severe illness. This money is paid directly to the policyholder or covered individual in cash, so it can be used to pay for everything from uncovered medical expenses to bills to experimental treatments. Critical illness insurance is different from health insurance, though both types of policies may be offered by employers or insurance companies. The criteria for a “critical” illness are quite limited, so it may be difficult to receive a payout unless you are diagnosed with a very specific illness or disease. However, payouts can be quite substantial and premiums quite low, depending on the policy you choose. Many wonder if critical illness insurance is even worth the money. However, in the wake of the 2020 global pandemic, the critical illness insurance market witnessed incredible growth, for obvious reasons. However, even if you are remarkably healthy, your existing health insurance may not suffice if you fall critically ill. In an article for the insurance firm Breeze, Jack Wolstenholm notes that most health insurance coverage, even policies from top-tier companies, rarely cover all of an individual’s expenses when it comes to a critical illness diagnosis: “When you do have to use your insurance, you often find it doesn’t cover all expenses,” Wolstenholm writes in the article, “you’re still left with out-of-pocket expenses. For example, health insurance comes with deductibles. Once the deductible is met, many plans still only pay 60 to 80 percent of the cost for a procedure. That means if your treatment costs $10,000, you might still get a bill for $2,000 to $4,000 even with insurance. The same goes for disability insurance. There’s the elimination period, the time between when you become disabled to when benefits kick in. Plus, the injury or illness typically requires medical treatment, which disability insurance doesn’t cover. And two-thirds of all bankruptcy filings are at least partially caused by medical issues.”How Critical Illness Insurance Works
Not that long ago, critical illnesses almost certainly meant a short life. Now, with medical advances, many who are diagnosed with a critical or serious illness are able to live long, full lives. Survival rates are greater for those with such illnesses than ever before. However, medical treatment, especially long-term medical treatment for a critical illness, is hardly inexpensive. The high cost of treatment and out-of-pocket medical bills that health insurance policies won’t cover can be debilitating, especially as healthcare costs continue to rise. This is where critical illness policies come in. These policies are inexpensive when it comes to premiums and pay out a lump-sum payout or “benefit” to individuals who are diagnosed with a critical illness. The covered policyholder will need to submit a claim in order to receive that benefit, which is paid in its entirety directly to the policyholder. Critical illness insurance can be a literal lifesaver, but the scope of illnesses that qualify as critical is extremely limited. If your diagnosed illness is not on that list, you likely will not succeed in filing a claim receiving your lump-sum benefit. Still, critical illness policies can be very helpful. The benefit payout covers anything you want, as you receive it in cash. If your critical illness has left you with out-of-pocket medical costs, you can pay those. A critical illness could lead to permanent or temporary loss of income or the ability to work, and disability insurance is pricey and not everybody can afford it. A critical illness insurance policy payout could cover things like groceries, utilities, mortgages, and more. That cash can also be used to pursue experimental treatment options if you’re interested in them. If you need to travel for a procedure and require transportation and shelter, the payout funds can be used for that as well. All in all, critical illness insurance is excellent for helping patients focus entirely on their recovery.What Does Critical Illness Insurance Cover?
This insurance policy is usually paid in one lump sum directly to the policyholder or beneficiary once a formal diagnosis has been accepted by the insurance company. This money can be used for virtually anything; however, it is best used to cover whatever out-of-pocket expenses you are responsible for under your health insurance policy. Health insurance companies almost never cover the full cost of medical care. At the very least, policyholders will have to deal with deductibles, travel to the hospital, and so on. Critical illness insurance can be a great help in covering these costs, along with any other bills you may have.Who Needs Critical Illness Insurance?
People who don’t really need a large amount of coverage can benefit from this kind of insurance. It is often used by those who can’t afford hefty disability insurance premiums. It may also be worth your while to purchase a genetic testing kit or review your family’s history of certain illnesses to help you weight whether to obtain critical illness insurance. For example, Parkinson’s disease is considered a critical illness. If you have a strong chance (over 50%) of an eventual Parkinson’s diagnosis, you may want to consider critical illness insurance.Frequently Asked Questions About Critical Illness Insurance
What is classified as a critical illness?
In most cases, the types of illnesses that are covered by critical illness insurance are extremely serious. Typically, they include:- Cancer
- Kidney failure
- Fulminant viral hepatitis, also known as massive necrosis of the liver caused by viral agents that lead to liver failure
- Major organ transplants
- Paralysis, including the complete and incurable loss of one limb or all the limbs
- Multiple sclerosis
- Primary pulmonary arterial hypertension
- Total or incurable blindness
- Bacterial meningitis caused by inflammation of the brain membranes or spinal cord
- Brain surgery
- Apallic syndrome, also known as the universal necrosis of the brain cortex
- HIV contracted by medical staff or due to blood transfusion
- Full-blown AIDS
- Total or incurable deafness
- Total or incurable loss of the ability to speak
- Alzheimer’s disease or another degenerative brain disorder
- Parkinson’s disease
- Heart attack
- Heart valve replacement due to defects, injuries, or abnormalities
- Coronary artery diseases that require a bypass or other invasive procedure
- Aorta surgery via thoracotomy or laparotomy
- Stroke
- Coma
- Third-degree skin burns that cover at least 20% of the body’s total surface area
- Terminal illnesses
- Motor neuron diseases
- Chronic liver diseases
- Chronic lung diseases
- Major head trauma
- Anemia caused by chronic persistent bone marrow failure
- Muscular dystrophy
- Benign brain tumor
- Encephalitis
- Poliomyelitis
