What is Critical Illness Insurance?
Critical illness insurance is coverage designed to pay for the often high cost of treating a life-threatening condition like cancer, stroke, or heart attack. Diagnosis with a critical illness activates the policy benefit, giving the insured money to use for their medical expenses.
Critical illness insurance is also known as catastrophic illness insurance or critical care insurance.
Critical illness insurance as a standalone product
Treating a critical illness costs a lot of money, and some of the required care might not be covered by traditional health insurance. Critical illness insurance can step in to ensure you don’t face a sizable financial burden at the same time you’re dealing with a pressing health issue.
For this insurance to kick in, you need to be diagnosed with a qualifying illness, which usually includes things like:
- Heart attack
- Kidney failure
- Sudden cardiac arrest
With a qualifying diagnosis, these policies pay out a one-time lump sum. You can use that money for:
- Medical services and treatments your health insurance won’t cover
- Income replacement if you’re unable to work
- Transportation to and from treatment
- Any necessary modifications to your home
In fact, you can use the benefit from critical illness insurance however you want. You could even use it to take a bucket list trip.
Critical illness benefits in life insurance
While critical illness insurance is available as a standalone product, it’s often more cost-effective to add it as a benefit to your life insurance policy. You might have the option to add it for free or as a rider, which means you’ll pay slightly more for your policy with this benefit added.
When you tap this policy benefit because of a qualifying critical illness, you get a lump sum of money from your life insurance provider. They then reduce your death benefit by that amount, and you may be subject to fees or other costs at that point.
The main thing, though, is that the money (including any fees) comes from your death benefit. While that means leaving your beneficiaries with less when you pass away, it also means you won’t amass debt while you’re living. Plus, this benefit may enable you to access care that isn’t covered by health insurance but could make a significant difference in treating your critical illness.