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Insurance Critical Illness Insurance

Critical illness insurance cover is a type of insurance protection under which you are covered for the eventuality wherein you are diagnosed with a critical illness as listed in the insurance plan.

What is Critical Illness Insurance?

This is a specialized insurance policy that pays a lump-sum, tax-free amount to a policyholder if he/she is diagnosed with certain specific critical conditions. The illness covered under this policy includes the 3 primary illnesses; cancer, stroke and heart attack. Other illnesses that may be covered include heart transplant, angioplasty, coronary bypass surgery, paralysis, kidney (renal) failure and major organ transplant.


Why Was It Created?


Critical illnesses result in financial devastation for millions of people and families, including people who have health insurance. As a result, critical illness insurance was created to provide cash at a time when it is required most.


Medical issues contribute to more than 60 percent of bankruptcies in the U.S. According to a study, more than three-quarters (around 77.9 percent) people had health insurance at the beginning of a bankrupting illness. This study was performed before the current economic downturn and will most likely understate the present burden of financial suffering.


How Much Money Can I Expect to Get?


Cash payments can range from $10,000 to almost $1 million. Payment is made as a single or lump sum amount as soon as an individual is diagnosed with a covered medical condition. In fact, some policies provide multiple cash payments. For instance, if you have cancer and survive, you will receive a cash payment. In case you have a heart attack 3 years later, another payment is made. However, this can vary from one insurance provider to another, so make sure to ask if it applies.


Why Do I Need This Insurance?


There are several benefits of having a critical illness insurance policy. These include receiving:


  1. Cash for paying medical expenses not covered by your healthcare plan.
  2. Cash for paying your mortgage while you recover.
  3. Cash for paying bills like car payments, insurance premiums, etc.
  4. Cash to cover travel expenses for treatments that are not available locally.
  5. Cash to help replace a spouse's income whilst caring for the policy holder.
  6. Cash for paying for experimental treatments that are not covered.


How Much Will I Need to Pay?


To confirm this, you should use an insurance calculator. Deciding on how much insurance protection to buy is a personal decision. A simple way is to multiply your monthly mortgage payment by 24 (2 years). Imagine the peace of mind of knowing that you will be free of mortgage payments while you undergo treatment and recover.


For example, a non-smoker male aged 40 seeking a cash benefit payment of $10,000 will have to pay between $180 and $200 a year. A smoker would have to pay about 50 percent more. A female aged 50, buying $20,000 of coverage will have to pay around $350 a year. Insurance rates for smokers significantly increase after one reaches the age of 50.


Are There Different Types of Critical Illness Insurance?


  1. There is simplified issue individual protection that is generally available in amounts up to $50,000. With these policies, insurers usually ask only a few health questions. They are affordable and available through individual insurance professionals.
  2. Fully underwritten individual plans are available in higher amounts up to $500,000. For this, the insurer will request more medical information. These plans are available through individual insurance professionals.
  3. Some plans are available through employers, which are usually offered on a voluntary basis (paid fully by the employee). There are even life insurance policies that offer this type of insurance, which are available as a rider to your existing policy.


Purchasing Insurance


The first and most important thing is to only buy as much protection as you can afford comfortably. The cost for coverage can vary from one provider to another. Hence, it is best to work with a knowledgeable professional or broker who has access to coverage from multiple companies. He/she will make sure that you get the best coverage possible at the lowest cost.


Last Updated: 2013-10-21

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