Critical illness (CI) insurance isn’t a widely known form of coverage and it’s only existed in the United States since the 1990s. Despite this, critical illness coverage is gaining in popularity, especially among employers who want to improve their employee benefits package to attract skilled workers. This type of coverage is designed to fill the coverage gaps associated with expensive illnesses to make care for conditions like cancer, stroke, and heart attack more affordable.
What is Critical Illness Insurance?
This specialized form of insurance is designed to help cover the cost of treating a critical illness by providing a tax-free, lump sum payment if the policyholder suffers from a covered condition. Common critical illnesses covered by this type of policy include:
• Heart attack*
• Major organ transplant
• Kidney failure
• Coronary bypass surgery
* These three illnesses are virtually always covered by this type of policy.
Who Needs Critical Illness Coverage?
A critical illness like cancer can be financially devastating, even with health insurance, due to significant copays, deductibles, and expenses that are not covered by insurance. The risk of suffering a critical illness is not slight: about 1.4 million people are diagnosed with cancer every year in the US while 600,000 suffer a stroke and 785,000 have a heart attack.
In addition to the high medical costs of a critical illness, such as prescriptions, copays, and deductibles, most people also have living expenses to cover during an illness such as a mortgage, credit card payments, property taxes, and utilities. Most health insurance is also linked to employment; a serious medical event can result in loss of health coverage. If you become seriously ill and take time off work, your spouse will likely take time off as well for an even greater loss in income. While disability coverage can help, it usually only covers 60% of your income.
Critical illness insurance is an affordable and easy way to protect against the risk of a critical illness.
Critical Illness Coverage Options
CI insurance is available as an individual policy, as a rider on a life insurance policy, or through an employer’s group coverage plan. If you choose an individual plan, there are two main types: a simplified issue protection plan for up to $50,000 in coverage without a medical exam or a fully underwritten plan for up to $1 million in coverage with an exam.