|December 2016 Volume 9, Number 12|
What You Need to Know Before Purchasing Critical Illness Insurance
Advances in emergency treatments and medical care make it more likely you will survive a critical illness. The question is whether you can survive the cost of recuperation.
Critical illness insurance was created in the 1990s to help people pay for expenses associated with critical illness — expenses that often can lead to bankruptcy. A well-known 2009 study by Harvard University showed that 60 percent of all bankruptcies result from medical expenses and three-quarters of people filing for bankruptcy had health insurance.
How Critical Illness Insurance Helps
Critical illness insurance pays the insured person a single, tax-free payment when they receive a diagnosis of specified illnesses. Payments generally range from $5,000 to $1 million. Some policies will make multiple cash payments if you have more than one critical illness, such as cancer one year and a heart attack a few years later.
What Qualifies as Critical Illness
Critical illness insurance policies cover three main types of illnesses — cancer, heart attacks and strokes. Some policies also cover heart transplants, coronary bypass surgery, angioplasty, kidney (renal) failure, major organ transplant and paralysis. Milliman, an actuarial consulting firm, estimates that 12 to 15 out of every 1,000 people over the age of 50 will experience one of the five conditions covered by critical illness insurance.
Different Types of Coverage
Your coverage options depend on the amount of coverage you need and the types of illnesses you are at risk for. For instance, some plans extend coverage to cover Parkinson’s disease, Alzheimer’s, amyotrophic lateral sclerosis, loss of sight and speech, and heart valve replacement.
Insurers Offer Coverage in Four Different Ways:
Payments can be as low as $25 to $50 a month. A 42-year-old could pay $54 to $66 per month for a $50,000 policy. A 60-year-old could pay $210 per month for the same amount of coverage. As with most health coverages, costs can continue to increase as you get older. However, options vary from insurance to insurer, so it pays to talk to an independent insurance broker, who can access information from multiple carriers.
Points to Consider
Critical illness insurance is not for everyone. Many people who purchase this type of insurance stop making payments before they reach their high-risk years. Critical illness insurance only covers specific illnesses, and the condition must meet a very specific definition to be covered.
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