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Home arrow Resources arrow Articles arrow What is Critical Illness Insurance?

What is Critical Illness Insurance?

You never know when an illness could strike, nor the impact it could have on your personal finances. Sure, you have health insurance to cover the major costs, but how will you support yourself and your family if you develop a critical illness? Rather than file bankruptcy, protect yourself with a critical illness insurance policy.

Critical illness insurance pays a cash benefit when an individual covered under a critical illness insurance policy is diagnosed with a covered disease or health condition. Usually, the cash benefit is a single lump-sum amount, although in some cases, the policy is designed to pay out over the course of several weeks, months or years in order to help pay the bills or cover ongoing costs of living.


Why Purchase Critical Illness Insurance?

Thousands of people are diagnosed with life-altering diseases, such as cancer, every single day. Those individuals often undergo weeks or months of medical treatments, such as chemotherapy and radiation, which leave them weak and unable to generate an income. While health insurance may pay for the actual medical expenses associated with treating a disease, it does not provide any assistance in paying day-to-day living expenses, such as the grocery bill or the car payment.

Critical illness insurance is designed to help with the financial burden families experience when someone is diagnosed with a serious illness. Even if the person diagnosed is not responsible for generating an income, the additional money paid from a critical illness insurance policy can help pay for the health insurance coinsurance amounts, as well as copays and deductibles. The money is yours to use as you see fit and insured individuals are never required to provide documentation or explanation of how the funds will be used.

Filing a Claim

The amount of money available to the policy holder may vary depending on what type of illness or health problem develops, as well as how severe the condition is. Generally, critical illness insurance pays out benefits for conditions that limit the insured's ability to continue working to support his or her family or lifestyle.

Examples of commonly covered conditions include terminal illnesses, multiple sclerosis, Parkinson's disease, organ failure, Alzheimer's, deafness, and blindness. In order to file a claim, however, insurance companies require an official diagnosis from a qualified medical doctor.

Purchasing Critical Illness Insurance

Although critical illness insurance is available from multiple sources, it is often purchased in conjunction with a life insurance plan. Terms and conditions vary by provider, but almost all insurers will make a decision to extend critical illness coverage based on the applicant's existing health, family history and overall risk profile.

Insurance premiums may reflect the insured's calculated risk, including age. Older applicants are more likely to file a claim than younger ones, so premium quotes are higher for older applicants. Also, premiums vary depending on the benefit amount requested. For example, purchasing $50,000 in critical illness insurance coverage will cost more than purchasing a policy with a $20,000 benefit.

In order to ensure that you get the best coverage at the best rates, it is important to compare critical insurance policies and premiums from multiple companies. You can do so by taking the time to shop each insurance company individually or saving time with multiple quotes from an independent insurance agent.

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