Critical Illness Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What Is Critical Illness Insurance

Critical illness insurance is a type of coverage that provides a lump-sum payment if the policyholder is diagnosed with a specified illness or condition. It helps individuals and families cope with the financial burdens that can arise from a serious medical diagnosis. Critical illness insurance can be a valuable supplement to health insurance and provide peace of mind in challenging times.

How Does Critical Illness Insurance Work

Critical illness insurance provides a lump-sum payment if the insured person is diagnosed with a covered illness. The payout can be used to cover medical expenses, replace lost income, or pay off debts. The policyholder pays regular premiums, and if a covered illness is diagnosed, they submit a claim and receive the benefit.

What Is Critical Illness Insurance

What Is Covered By Critical Illness Insurance

Critical illness insurance is a type of coverage that provides financial protection in the event of a serious illness. It typically covers a specific list of medical conditions, such as cancer, heart attack, or stroke. The policyholder receives a lump sum payment if they are diagnosed with a covered illness, which can be used to cover medical expenses or other financial obligations.

Does Critical Illness Cover:

Benefits Of Critical Illness Insurance

Critical illness insurance provides financial support in the event of serious health issues. Here are its key benefits:

Financial Security

  1. Lump-Sum Payment: On diagnosis of a covered illness, you receive a one-time, lump-sum payment. This can be used for various expenses.
  2. Coverage of High Medical Costs: Helps cover expenses for treatments that may not be fully covered by standard health insurance.
  3. Income Replacement: Compensates for lost income during recovery from a critical illness.

Related Reading: Does Critical Illness Cover Pay Monthly?

Flexibility in Use

  1. Unrestricted Use of Funds: The payout can be used for medical bills, living expenses, debt repayment, or any other financial need.
  2. Supplemental Coverage: Acts as an additional layer of financial protection, supplementing your existing health insurance.

Peace of Mind

  1. Reduces Financial Stress: Alleviates the worry of financial burden during a health crisis.
  2. Focus on Recovery: Allows you to concentrate on healing without the stress of financial concerns.

Adaptability

  1. Variety of Covered Illnesses: Typically covers a range of illnesses, such as cancer, heart attack, stroke, and more.
  2. Customizable Plans: Offers options to tailor coverage based on individual needs and budgets.

Additional Benefits

  1. Tax-Free Payouts: In many regions, the lump-sum payout is tax-free, maximizing the benefit received.
  2. Return of Premium Option: Some policies offer a return of premium if no claim is made during the policy term.

Is Critical Illness Insurance Worth It

  • Pros:
    • Provides financial relief during a difficult time.
    • Covers additional expenses that health insurance might not.
    • Lump sum payment offers flexibility in usage.
  • Cons:
    • Additional cost on top of health insurance.
    • Limited coverage to specific illnesses.
    • May not be necessary if you have substantial savings or comprehensive health coverage.

Should I Get Critical Illness Insurance

  • Consider Your Health Risks: Family history and personal health risk factors matter.
  • Financial Situation: If an illness would strain your finances, it’s worth considering.
  • Existing Coverage: Evaluate your current health and disability insurance.
  • Lifestyle Impact: Consider how an illness could affect your lifestyle and savings.

Related Reading: Does Critical Illness Have A Death Benefit?

Critical Illness Vs. Health Insurance

FactorCritical Illness InsuranceStandard Health Insurance
CoverageSpecified serious illnessesGeneral medical expenses
Payment TypeLump sumBased on medical bills
Use of FundsFlexibleMedical costs only
PremiumGenerally higherVaries based on plan
PurposeSupplemental coveragePrimary medical coverage
What Are The Different Types Of Critical Illness Insurance Policies

The Role Of Critical Illness Insurance Brokers

  • Navigating the Labyrinth: Brokers are your compass in the vast sea of insurance. They have the expertise to match you with the best critical illness policy tailored to your needs.
  • The Difference Makers: Reputable critical illness insurance brokers save you time and money by leveraging their relationships and knowledge.

The Best Critical Illness Insurance

Determining the best critical illness insurance policy depends on individual needs and preferences. Assurity and Mutual of Omaha are both reputable providers with unique features:

Assurity Critical Illness Insurance

  • Triple Category Coverage: Assurity’s policy stands out for its unique structure. It’s essentially three policies in one:
    1. Cancer Coverage: Pays for cancer-related illnesses.
    2. Cardiovascular Coverage: Addresses heart-related conditions like strokes and heart attacks.
    3. General Coverage: Encompasses a range of other critical illnesses, including burns, Alzheimer’s, and kidney failure.
  • Non-Medical Underwriting: For certain limits, Assurity offers a simplified underwriting process, making it easier to qualify.
  • Multiple Claims: Policyholders can make one claim per category, allowing for up to three claims in total.

Mutual of Omaha Critical Illness Insurance

  • Customization: This policy is highly customizable:
    1. Cancer-Only Coverage: Option to focus solely on cancer-related illnesses.
    2. Individual or Family Coverage: You can opt for individual coverage or expand it to include a spouse and/or child.
  • Single Event Payout: Unlike Assurity, Mutual of Omaha pays for only one covered event.

Comparison of Assurity and Mutual of Omaha

FeatureAssurityMutual of Omaha
Coverage Categories3 (Cancer, Cardiovascular, General)Customizable (Cancer, Individual, Family)
Claims Per Category1 claim per category (up to 3)1 claim per policy
Underwriting ProcessNon-medical for certain limitsStandard
Policy FlexibilityHigh (3 in 1 policy)Very High (Customizable)

Next Steps

Critical illness insurance offers a financial safety net for specific serious health conditions. Its value depends on individual health risks, financial status, and existing insurance coverage. Weighing its benefits against your personal circumstances will help determine its relevance for you. Contact us today for a free quote.

Critical Illness Insurance Quotes

Feel free to contact us for a critical illness insurance quote online. The service is free of charge.

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Frequently Asked Questions

What does critical illness insurance typically cover?

What Is Critical Illness Insurance

Critical illness insurance policies are designed to provide financial protection if the policyholder is diagnosed with a critical illness. The benefit amount is typically paid out as a lump sum and can help cover the costs of medical treatment, lost income, and other associated expenses.

Are critical illness plans worth it?

Critical illness insurance can provide peace of mind, knowing that you and your family are financially protected in the event of a critical illness. However, it is essential to consider the potential drawbacks before purchasing a policy, such as the cost of premiums and the waiting period before benefits are payable.

Who needs critical illness insurance?

Critical illness insurance is typically recommended for people who are considered to be at high risk of developing a critical illness, such as those with a family history of cancer or heart disease. However, it can also be beneficial for people who do not have health insurance or who have limited coverage.

What is some alternative to critical illness insurance?

Some alternatives to critical illness insurance include health insurance, disability insurance, and long-term care insurance.

How long does it take for critical illness insurance to pay out?

Critical illness insurance policies typically have a waiting period of 30, 60, or 90 days before the benefit is payable. The waiting period helps ensure the policyholder is diagnosed with a critical illness, not just a minor ailment. However, we do have companies that will pay upon diagnosis.

Can I get critical illness coverage after the diagnosis?

Critical illness insurance policies cannot be purchased after you have been diagnosed with a severe illness. These policies are designed to provide financial protection if you are diagnosed with a critical illness after the coverage is in place by the insurance company.

Does critical illness pay out more than once?

No, critical illness insurance policies typically only pay out once. The benefit amount is typically paid out as a lump sum and can help cover the costs of medical treatment, lost income, and other associated expenses. However, there are exceptions where companies will pay out for each category.

What is the difference between life insurance and critical illness?

Life insurance provides financial protection if the policyholder dies. Critical illness insurance provides financial protection if the policyholder is diagnosed with a critical illness. The benefit amount for critical illness insurance is typically paid out as a lump sum. However, it can be used to help cover the costs of medical treatment, lost income, and other associated expenses.

Can I have a critical illness without life insurance?

Yes, you can purchase a standalone critical illness insurance policy. However, most life insurance policies include an accelerated benefit rider that provides financial protection if the policyholder is diagnosed with a critical illness. This allows you to take some of your death benefits early.

Do you have to pay tax on critical illness payout?

No, the benefit amount from a critical illness insurance policy is typically not taxable.

Does critical illness cover heart failure?

Critical illness insurance policies typically cover heart failure. The benefit amount is typically paid out as a lump sum and can help cover the costs of medical treatment, lost income, and other associated expenses.

What is not covered by critical illness insurance?

Pre-existing conditions are typically not covered by critical illness insurance policies. In addition, critical illness insurance typically does not cover routine check-ups or preventive care.

How much does critical illness insurance cost?

Critical illness insurance premiums vary based on the policyholder’s age, health, and lifestyle. However, it is typically more expensive than other types of insurance, such as health insurance.

Is critical illness insurance worth it?

Critical illness insurance can benefit people who do not have health insurance or limited coverage. It can also help cover medical treatment costs, lost income, and other associated expenses.

What is an exclusion in critical illness insurance?

An exclusion is a condition or circumstance not covered by an insurance policy. Exclusions vary by policy, but standard exclusions for critical illness insurance include pre-existing conditions, routine check-ups, or preventive care.

When should I get critical illness insurance?

Critical illness insurance is typically purchased when you are younger and in good health. This is because the premiums are typically lower when you are younger, and your chances of being diagnosed with a critical illness are typically lower.

What three major categories of critical illness insurance carriers often group covered conditions?

Cancer, heart conditions, and stroke are often the three major categories into which critical illness insurance carriers group covered conditions.

Does critical illness insurance cover pregnancy?

Critical illness insurance typically does not cover pregnancy. This is because pregnancy is considered a pre-existing condition.

How long does it take to settle a critical illness claim?

It typically takes around 30 days (waiting periods) to settle a critical illness claim for a covered illness.

What is the average payout for critical illness insurance?

The average payout for critical illness insurance coverage is typically $10,000. However, payouts vary based on the policy and the insurer. There are many options to choose from that are as low as $10,000 and up to $500,000 cash benefits. The larger the benefit, the higher the premium. There are coverage limits on each plan.

What is the difference between critical illness insurance and health insurance?

Critical illness insurance provides financial protection paid directly if the policyholder is diagnosed with a critical illness. A Health insurance plan typically covers the costs of medical treatment, but it does not provide a lump-sum benefit like critical illness insurance.
You can have supplemental coverage by adding CI to your health coverage to pay unrecovered expenses. CI is not considered a life insurance company but a health insurance company.

Is rheumatoid arthritis considered a chronic illness?

There is no definitive answer to this question, as each insurance company has its definition of what constitutes a chronic illness. However, some insurers may consider rheumatoid arthritis to be a chronic illness.

What is the cost of critical illness insurance?

Critical illness insurance premiums vary based on the policyholder’s age, health, and lifestyle. However, it is typically more expensive than other types of insurance, such as health insurance.

What is the expected benefit ratio?

The expected benefit ratio is the percentage of people benefitting from their critical illness insurance policy. The average is 60%. This means one will claim every two people with a critical illness insurance policy.

Is critical illness considered a voluntary benefit?

Critical illness insurance is typically considered a voluntary benefit. This is because it is not required by law but can benefit employees. In addition, employers often offer voluntary benefits as an added perk for employees.

What are the disadvantages of critical illness insurance?

The disadvantages of critical illness insurance include high premiums, limited coverage for certain illnesses, strict policy conditions, potential exclusions based on pre-existing conditions, and the possibility of not receiving a payout if the illness does not meet the policy criteria.

How is critical illness insurance paid out?

Critical illness insurance typically pays a lump sum cash benefit upon diagnosing a covered illness or condition. The policyholder must survive a waiting period, usually 30 days before the benefit is paid. The policyholder can use the payout for any purpose, such as medical expenses, lost income, or other financial needs.

What is the difference between critical illness and terminal illness?

Critical illness refers to serious, potentially recoverable conditions like heart attacks or strokes. Terminal illness describes incurable diseases with a prognosis leading to death, focusing on palliative care, such as advanced cancer.

Is critical insurance worth it?

Determining whether critical illness insurance is worth it depends on an individual’s needs and financial situation. Those who have a family history of critical illnesses or limited savings may find it beneficial.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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