While your health insurance will cover most of your medical expenses, and costs associated with some medical issues, it won't cover you for lost income and non-medical expenses you incur if you are unable to work due to your illness.
For example, if you have a debilitating stroke or heart attack, your insurance will cover treatment, but you may have to foot a large portion out of pocket and you may need extra funds during your recovery to make ends meet.
So, how do you pay for the expenses that medical insurance and disability insurance do not cover? Critical illness insurance can fill the gap when you need it most.
This is especially true if you have a high-deductible health plan. If you suddenly are faced with a medical bill associated with a cancer diagnosis or a stroke, it could be a massive financial strain, particularly if you are unable to work for a time and don't have the income to pay those out-of-pocket medical bills.
In this case, you could use proceeds from the insurance to pay your deductible and more. The peace of mind having critical illness insurance when you also have an HDHP is worth its weight in gold. Fortunately, these policies are often reasonably priced.
How it works
Critical illness insurance will pay you a lump sum cash in case of a serious illness. The number of covered illnesses depends on the policy, but the average is 19. Some common ones include:
- Heart attack,
- Serious COVID-19 hospitalization (depending on the severity and incapacitation),
- Alzheimer's disease,
- Kidney failure, and
- Paralysis or paraplegia.
The size of the payment depends on the policy limits. It can range from $5,000 up to $100,000. A few policies offer a lifetime maximum of up to $500,000. The higher the lifetime maximum, the more you will pay in premium.
Typically, individual critical illness coverage is guaranteed renewable for life, as long as the policy is purchased before the age of 70. That said, after an insured turns 70, the policy's benefit amount is reduced by half.
That means if you buy critical illness insurance with a $50,000 benefit amount prior to age 70, and if you make a claim when you are 76, the policy will pay $25,000.
Once you have the funds, you can use them for anything you need, like health insurance deductibles, special equipment, wheelchair, costs of seeing a specialist for whom your health insurance won't pay, transportation and childcare.
You can even use the funds to pay your mortgage, utilities and other day-to-day necessities. There are no restrictions on how you spend the money. Once it's yours, it's yours.
How much it costs
The cost of a critical illness plan will vary on your age, health, whether you smoke or not, and what kind of work you do.
Critical illness insurance can be relatively inexpensive.
A 35-year-old non-smoking male architect in Savannah, Ga. would pay about $50 per month for a single plan benefit of $50,000. At 55, that same man would pay $148 a month. Smoking raises premiums substantially.
The policy price will also depend on how many illnesses or health issues a policy would cover.
What to do next
You may be wondering if this type of insurance is right for you. If you're interested, please call us and we can go over the specifics and help you shop around for a policy.
You may also want to check with your employer, as many companies offer it as a voluntary benefit to their staff at group rates.