Critical Illness Insurance for Individuals
Critical Illness Insurance Pays a Lump Sum Cash Benefit When You Are Diagnosed With a Critical Illness
In the time it takes you to read this sentence, the bills from a critical illness may have forced yet another American to file for bankruptcy. Some 1.4 million Americans filed for bankruptcy in 2009, which equates to about three every minute.
In the late 1990s, a new financial product was developed to help consumers cover expenses associated with critical illness. Appropriately, it is called Critical Illness Insurance.
This specialized insurance provides a lump sum, tax-free payment should a policyholder suffer from certain specific critical conditions. Some 600,000 Americans now have this protection purchased on an individual basis or through a plan offered by their employer.
What Is A Critical Illness?
For purposes of this explanation, we are going to list those illnesses that are covered by critical illness insurance policies.
The three primary are: cancer, heart attack and stroke.
Critical illness insurance policies may also cover such conditions as
Coronary bypass surgery
Kidney (Renal) failure
Major organ transplant
Why Was Critical Illness Insurance Created?
Here is the short answer: Critical illnesses cause financial devastation to millions of individuals and families (even those with health insurance). A product was created that would provide cash at a time it was needed most.
For those who want a lot more information. Consider the following: Medical problems contributed to over 60 percent of all bankruptcies in the United States and a 2008 Harvard University study found that more than three-quarters (77.9 percent) had health insurance at the start of the bankrupting illness. This study was performed prior to the current economic downturn and will likely understate the current burden of financial suffering.
Critical illnesses are striking more Americans every single year. Some 1.4 million Americans are diagnosed with cancer (American Cancer Society). An estimated 785,000 Americans will have a first heart attack and some 600,000 Americans will experience their first stroke (American Heart Association). The vast majority will survive.
The financial consequences of surviving a critical illness are something few people are prepared for. Most health insurance policies come with deductibles and co-pays that can be as much as $5,000 a year. Prescriptions are not just costly, they are rarely fully covered.
In addition, here is something you likely have not considered; while you are undergoing treatment or recovering for an extended period, you will still have to pay your health insurance premiums. You’ll pay insurance, rent or mortgage, credit card bills, school tuition, real estate taxes, food and utilities.
According to the Harvard study, many families with health insurance found themselves under-insured and responsible for thousands of dollars in out-of-pocket costs. The average out-of-pocket cost was $17,749 for all medically bankrupt families. Because most health insurance is linked to employment, a medical event can trigger loss of coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged $22,568.
How Much Cash Can I Receive?
The cash payments, which can range from $10,000 to as much as $1 million, are paid as a single, lump sum payment as soon as the individual is diagnosed with a covered condition.
Some policies will actually provide multiple cash payments. Say you have cancer and survive; you get a cash payment. Three years later, you have a heart attack; you get another payment. However, this varies from insurer to insurer, so be sure to ask if it applies.
Why Would I Need Critical Illness Insurance Benefits?
Cash to pay for medical treatments not covered by your health plan.
Cash to pay your mortgage while you are recovering.
Cash to pay bills – from car payments to insurance premiums.
Cash so you can travel for treatments not available locally.
Cash to pay for experimental treatments (not covered).
Cash to replace a spouse’s income while caring for the insured.
We think you’ll find a way to put the cash to good use.
How Much Will I Pay For Critical Illness Insurance?
Deciding how much critical illness insurance protection to buy is clearly a personal decision. A simple way to approach the matter is to multiply your monthly mortgage payment by 24 (2 years worth). Imagine the peace of mind of knowing you will be mortgage-payment free while you recover and undergo treatment.
As an example, you will see that a male age 40 (non-smoker) seeking a cash benefit payment of $10,000 would pay between $180 and $200-a-year for critical illness insurance. Smokers will pay about 50 percent more. A female age 50, purchasing $20,000 of coverage, will pay about $350 a year. Rates for smokers increase significantly after one reaches age 50.
A number of insurers will issue up to $50,000 or critical illness insurance coverage without a medical exam. Referred to as simplified issue, this is a good way to go for the vast majority of individuals. It is also the most affordable and a good place to start the processing of considering this highly important form of protection.