Medical problems contributed to over 60 percent of all bankruptcies in the United States and a 2008 Harvard University study found that more than three-quarters (77.9 percent) had health insurance at the start of the bankrupting illness. This study was performed prior to the current economic downturn and will likely understate the current burden of financial suffering.
Critical illnesses are striking more Americans every single year. Some 1.4 million Americans are diagnosed with cancer (American Cancer Society). An estimated 785,000 Americans will have a first heart attack and some 600,000 Americans will experience their first stroke (American Heart Association). The vast majority will survive.
The financial consequences of surviving a critical illness are something few people are prepared for. Most health insurance policies come with deductibles and co-pays that can be as much as $5,000 a year. Prescriptions are not just costly, they are rarely fully covered.
And, here is something you likely have not considered; while you are undergoing treatment or recovering for an extended period of time, you will still have to pay your health insurance premiums. You'll pay insurance, rent or mortgage, credit card bills, school tuition, real estate taxes, food and utilities.
According to the Harvard study, many families with health insurance found themselves under-insured and responsible for thousands of dollars in out-of-pocket costs. The average out-of-pocket cost was $17,749 for all medically bankrupt families. Because most health insurance is linked to employment, a medical event can trigger loss of coverage. For patients who initially had private coverage but lost it, the family's out-of-pocket expenses averaged $22,568.
In the late 1990s, a new financial product was developed to help consumers cover expenses associated with critical illness. Appropriately, it's called Critical Illness Insurance. This specialized insurance provides a lump-sum, tax-free payment should a policyholder suffer from certain specific critical conditions.
Some 600,000 Americans now have this protection purchased on an individual basis or through a plan offered by their employer.
What Does Critical Illness Cover?
Critical illnesses cause financial devastation to millions of individuals and families (even those with health insurance). A product was created that would provide cash at a time it was needed most. Illnesses that are covered by critical illness insurance policies. The three primary are:
Critical illness insurance policies may also cover such conditions as:
How Much Can I receive?
The cash payments which can range from $10,000 to as much as $1 million. They are paid as a single, lump sum payment made directly to the consumer (you) as soon as the individual is diagnosed with a covered condition.
Some policies will actually provide multiple cash payments. Say you have cancer and survive; you get a cash payment. Three years later, you have a heart attack; another payment. But this varies from insurer to insurer, so be sure to ask if it applies.
Why Would I need a Critical Illness Policy?
Cash to pay for medical treatments not covered by your health plan.
Cash to pay your mortgage while you are recovering.
Cash to pay bills - from car payments to insurance premiums.
Cash so you can travel for treatments not available locally.
Cash to pay for experimental treatments (not covered).
Cash to replace a spouse's income while caring for the insured.
Are Their Different Types of Critical Illness Plans?
There is Simplified Issue Individual Protection which typically is available in amounts up to $50,000. Generally insurers will only ask a few health questions with these policies. They tend to be affordable and available from individual insurance professionals.
There are Fully Underwritten Individual Plans which are available in higher amounts; up to $500,000. Medical information will be requested by the insurer. These plans are also available from individual insurance professionals.
How Much Does a Critical Illness Plan Cost?
If approved, cost vary based on the consumers age and face value of the policy. Critical Illness plans are very affordable and can be customized to meet each individuals needs.
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