Critical Illness Insurance
A form of health insurance that delivers coverage separate from a standard medical policy, critical illness helps individuals in the event that they obtain a serious condition or illness. Critical illness insurance provides the plan member with a lump sum cash payment from their insurance company upon diagnosis of one of the insurer’s listed illnesses. A supplemental benefit in most cases, this type of coverage should be purchased in addition to a regular health plan.
The plan could either provide a payout of regular income or the payout could be applicable to a specific surgery. Terms may also include that the policyholder live a minimum amount of days from the date the illness was diagnosed, which is referred to as the survival period. Survival periods range from one insurer to another, though 28 and 30 days are a typical time frame used among major carriers.
In order to collect payment, you do not have to be disabled, and also do not have to be employed like disability insurance to receive benefits. You can purchase coverage as a supplement to your regular health or life insurance, or as a stand alone plan through certain companies. Most critical illness plans are issued for at least two years, and a maximum of 20 to 25 years to individuals under age 65. The lump sum cash benefit can be spend however you choose, whether it be medical care, supplies, bills, or anything else you need.
As any health plan varies depending on the carrier, critical illness benefits differ based on the health insurance company. Some cover more, some less, though many conditions can potentially make the list. Time also makes covered conditions variable, as over the years the frequency of a certain illness could decrease over a number of years. Like any other comparison, be sure to check the list of conditions with each insurer before deciding on a plan.
The following are examples of conditions that could be covered by a critical illness policy.
- Heart attack
- Organ transplant
- Kidney failure
- Alzheimer’s disease
- Multiple Sclerosis
- Aortic surgery
- HIV/AIDs obtained through blood transfusion/during an operation
- Certain cancers
- Severe burns
- Heart valve surgery
- Hearing/vision/speech loss
Considering a Policy
Who should buy a critical illness plan? Anyone who is concerned with protecting themselves and their family from debt as a result of medical expenses, for one. These policies are acceptable for any age group, though more frequently popular among individuals in their later years with the income to support an extra plan. Plans can run about the same per month as individual coverage, though it depends on the company, your age, and what state you live in.
Benefits are tax free when you purchase a critical illness supplement to a health insurance, making it more preferable than an addition to your life policy, which may be taxed from being interpreted as an accelerated death benefit. Plans will often give varied percentages for different conditions, though certain health problems will give you 100 percent of your total amount in one fell swoop. Heart attacks are an example of such conditions, as you will receive your cash benefit in full and your policy will therefore be terminated following the payout.
However, you must have detailed proof of the event according to the policy’s guidelines in order to receive the benefit. Each policy clearly outlines what the insurer considers a valid enough reason for each condition before issuing payout. If this was not the case, it might be an easy way to manipulate the insurer and get an instant $50,000.
Companies offering critical illness plans on the individual health market include Humana, UnitedHealthOne/Golden Rule, Assurity, Mutual of Omaha, American General, and Colorado Banker’s Life.