Critical illness insurance: what to consider before you buy

Trying to stay afloat financially in the face of serious illness can be a daunting task. So how do you make sure you have the money you’ll need to pay the extra costs that a serious illness brings? Critical illness insurance can help.


Filling the gap

Critical illness insurance can help cover the out-of-pocket expenses you’ll incur if you (or a covered family member) become seriously ill due to a condition covered by the plan. Once the insurance company receives proof of your diagnosis of a covered condition and approves your claim, you will be paid a specified amount of money in a single payment. You can use this money however you want.

Before you buy

Here are some tips to help you make the right decision about critical illness insurance.

  • See how the plan fits with your other benefits

    If you need to reduce your working hours or take a leave of absence, critical illness insurance can supplement any disability insurance payment you’re getting by providing extra money to help cover expenses when you’re earning less. Because most disabilities are caused by illness, you may want to learn more about disability insurance.

    Consider how a critical illness insurance plan fits in with your health insurance. It’s important to know that not all critical illness insurance policies are designed to be used with High Deductible Health Plans (HDHPs) or Health Savings Accounts (HSAs).* If you are covered by an HDHP or an HSA, you should consult a qualified tax advisor to evaluate your particular circumstances and possible adverse tax consequences prior to purchasing a critical illness plan.

  • Check the cost

    If you can purchase critical illness insurance through your workplace, you may get a group insurance rate that is more affordable than the one you’d get by buying a policy on your own.

  • Know what’s covered

    Not all critical illness plans cover the same illnesses or conditions. Some plans provide coverage for a broad range of illnesses, and others are very specific and may exclude cancer or provide coverage only for certain cancer diagnoses.

  • Understand how the payments work

    Each covered illness or condition may be subject to a different percentage of the benefit. For example, the insurance may pay 100% of the benefit for a heart attack but only 25% of the benefit for non-life-threatening cancer.

    Because critical illness policies don’t pay benefits indefinitely, it’s important to understand the maximum payments you could receive. You’ll also want to ask whether any benefits will be paid to you if the same condition returns.

Taking the time now—when you’re healthy—to learn about critical illness insurance can help give you peace of mind for the future.

*It’s important to note that a HSA is not the same as a Flexible Spending Account (FSA).

In some states, "Critical Illness" is referred to as "Specified Disease" and is subject to state specific variations.

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