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Critical Illness Insurance: Financial Protection for a Scary Diagnosis

Ilima Loomis

When you or someone you love has a medical emergency, it can feel like an emotional roller coaster. There’s the shock of the diagnosis, and fear about what’s ahead. But there’s also the worry about what the cost of treatment will do to your finances. That’s where Critical Illness insurance comes in.

How Critical Illness Insurance Works

Critical Illness insurance kicks in if you’re diagnosed with one of several life-threatening medical conditions. You don’t have to submit medical bills for reimbursement. Instead, the insurance policy pays you a lump sum.

The average payment for an individual policy is $12,028 per claim. You can use the money however you need it most. That means it can go toward copays or your share of the hospital bill, but you can also use it for non-medical expenses. Maybe you have to travel to and from treatment centers, or you need to take time off work to recover. Critical Illness insurance can also be used for things like transportation costs and living expenses.

Some of the medical conditions covered by Critical Illness insurance might include:

  • Invasive cancer
  • Non-invasive cancer
  • Heart attack
  • Stroke
  • Aneurism
  • Coronary bypass surgery
  • Organ transplant
  • Renal failure

If you enroll in Critical Illness insurance, you often can pay your premiums automatically through payroll deduction, which means you don’t have to worry about mailing a check or missing a payment. With many plans, you can also buy coverage for your spouse or children. That means your family’s finances are protected if anyone gets sick.

How Critical Illness Coverage Fits with Other Insurance

Even if you have medical insurance, it may not be enough. Out-of-pocket costs can add up quickly. For many families, these expenses are more than they can afford. That’s especially true if you have a high deductible health plan. Here are a few statistics to consider:

  • For women with breast cancer: One survey found that median out-of-pocket costs are $3,500, and a quarter of women surveyed had out-of-pocket costs totaling $8,000 or more. 
  • 45% of people with heart disease face financial hardship due to medical bills.

One study found that 66.5% of all bankruptcies are tied to health issues. And more than half a million people file for bankruptcy each year because of medical bills.

Critical Illness insurance helps fill in the gaps that your traditional health plan may leave behind. You can use it to pay for your share of medical expenses. Or it can help cover the other costs that crop up when someone gets sick.

How Critical Illness Insurance Works with Other Coverage You May Have

Critical Illness insurance also works hand-in-hand with other types of insurance to protect your finances. For example:

Disability Insurance

You might think accidents are the main reason people become disabled and can’t work. In fact, critical illnesses like cancer and heart disease are the cause of most disability claims. If you have a life-threatening illness and can’t work, Disability insurance can replace some of your income while you recover.

Long-Term Care Insurance

Even after you recover from something like a stroke, you might need long-term care. Regular health insurance usually doesn’t cover a stay in a nursing home or home health care. And paying these costs yourself can drain your savings. Long-term Care insurance can help you make sure your family is financially secure if you need ongoing help after a critical illness diagnosis.

Life Insurance

Cancer, heart attacks, and other critical illnesses are life-threatening medical emergencies. It’s hard to think about, but if you don’t survive, Life insurance can help protect your family from financial hardship. With Life insurance, your family will receive a lump sum if you pass. This money can be used to pay for funeral costs or cover their living expenses after you’re gone.

Using Critical Illness Insurance in Real Life

How you use Critical Illness insurance depends on your situation. Here are some examples.

Stroke

Nicole was lucky to survive a stroke, but after she came home from the hospital, she worried about her finances. The medical bills had drained her savings. And she was self-employed. That meant she wouldn’t have any income until she could work again. Nicole’s Critical Illness insurance policy paid her $25,000. The money covered her day-to-day living expenses while she recovered. She also used it to buy a plane ticket for her sister, who came to help take care of her for two weeks.

Cancer

When Ashley was diagnosed with stage 2 breast cancer, the out-of-pocket costs started adding up. She had a high deductible health plan. That meant she had to pay thousands of dollars before her health insurance kicked in. She also needed extra child care for her young daughter while she was going through chemotherapy. Ashley received a $12,000 payment from her Critical Illness insurance policy. She used it to pay her medical bills and babysitter. The money left over helped cover her living expenses while she took time off to recover.

Kidney Failure

After years of living with diabetes, Marcus was diagnosed with kidney failure. That meant he would need ongoing dialysis. Eventually, he would need a kidney transplant. Even though he had health insurance, Marcus’ share of the medical bills was significant. There were the copays for doctor visits and lab tests, his portion of the dialysis cost, medications, and his illness made it hard for him to climb stairs, so he had to remodel his house. With the $30,000 payment he received from his Critical Illness insurance policy, Marcus was able to cover his bills.

A Tool to Protect Your Financial Well-Being

When you have a life-threatening illness, it’s natural to worry about your finances as well as your health. After all, even if you have health insurance, medical bills can drain your bank account. And major health issues often come with other costs you didn’t see coming. With Critical Illness insurance, you don’t have to submit expenses for reimbursement or get prior approval. You get a cash payment you can use where you need it most. That means instead of worrying about your finances, you can focus on getting better.

This informational material shall not be considered financial advice. The Hartford assumes no responsibility for any financial, investment, or tax-related decisions. Those seeking resolution of specific financial, legal, tax, or business issues, questions, or concerns regarding this topic should consult their own financial, investment, tax, legal, or other business consultants, advisors, or other professionals.

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