A serious illness can be challenging not only for your health but also for the lifestyle you’ve created. An extended hospital stay can mean more medical bills not covered by your insurance, potential childcare costs, travel expenses for family members, and more.
While you can’t predict the future, you can plan for some financial help if the worst were to happen to you.
“The nice thing about critical illness [insurance] is that generally there’s a lump-sum payment,” explains Jeff Baechle, vice president of Individual Market Product Strategy at UnitedHealthOne. “The policyholder is now the owner of those dollars.”
That means the policyholder has the flexibility to determine the best way to use that benefit money beyond just paying for out-of-pocket medical expenses, prescriptions, and health insurance deductibles (the amount of money you pay before insurance kicks in).
Critical illness insurance payments can also be used for childcare, groceries, mortgage or rent, utility payments, and more to help ease your financial burden while you focus on your recovery.
As with any insurance policy, it’s important to read the fine print and understand exactly how the coverage works. Below are 5 things you should know before purchasing critical illness insurance.
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Before you learn what critical illness insurance is, you should understand what it is not: medical insurance. “This coverage is not meant to stand alone,” Baechle says. “It’s meant to be supplementary or complementary to other forms of coverage.”
But critical illness insurance can supplement a high-deductible medical insurance plan by providing funds to help cover out-of-pocket costs that could add up if you were in the hospital for a long period of time.
Critical illness insurance is also different from disability insurance. “Disability [insurance] is more tied to someone’s ability to work and may [include] periodic payments during the time someone can’t work,” Baechle says. You can have both policies in place at the same time.
It’s important when choosing a policy to know what illnesses the policy covers. “The range of what’s covered can be vast,” Baechle says.
Many insurance policies might not cover a pre-existing condition. For example, if you had cancer in the past, the critical illness policy might not cover cancer if it comes back. But it might cover another critical illness, like a heart attack or stroke, that occurs while you have the policy.
Some policies are also known as “one-time pay.” This means that once the policy is paid out for a critical illness, the policy is canceled, even if the holder gets another critical illness in the same year.
Understanding what’s covered by the policy and how the policy works in a calendar year can help you make the best choice for your family.
Policies vary across plans, Baechle says. Some plans are “composite rated,” meaning everyone pays the same price for the plan regardless of age and gender.
But it’s more common for critical illness plans to take into account your age or gender, Baechle says. This means you might wind up paying more for your policy if you’re older, because you’re statistically more likely to experience certain critical illnesses.
Depending on the plan, your critical illness policy might also include coverage for other members of your family at a certain percentage of your coverage.
Generally, the primary policyholder is eligible to receive a certain amount of money through critical illness insurance, Baechle explains. For some plans, your spouse or children can be added to the plan but not at 100% coverage — in other words, they aren’t eligible to receive as much money as you are if they were to ever need to take advantage of the policy. For example, they might be covered at 50%.
If anyone in your family were to experience a critical illness, having them on your policy could help pay necessary bills.
Any illness can be stressful, and bills can add up quickly. If you were stuck in the hospital, where would money come from to pay for copayments, childcare, deductibles, and other essentials?
While some people may have an emergency fund with which they could cover these costs, many do not. Knowing that you have financial help available through a lump-sum payout can help minimize financial stress so you and your family can focus on getting well.
Accident ProGuard Accident & Critical Illness Insurance brochure. "Accident ProGuard." UHOne.com. July 20, 2021. Retrieved from https://www.uhone.com/api/supplysystem/?FileName=45397B-G202108.pdf.
UnitedHealthOne. "Critical Illness Insurance." Retrieved from https://www.uhone.com/health-insurance/supplemental/critical-illness-insurance. Accessed February 10, 2022.