How critical illness insurance can help
A serious diagnosis brings costs that health insurance does not cover: deductibles and coinsurance, travel to treatment, and the income lost while you recover. Critical illness insurance is designed for exactly that gap. It pays you a cash lump sum when you are diagnosed with a condition the policy covers.
How it works
Critical illness insurance is a form of what regulators call specified disease coverage: it pays for a specifically named disease or list of conditions. Common examples are cancer, heart attack and stroke, but every policy has its own list and definitions.
When a covered diagnosis is confirmed, the policy pays a fixed amount. Under the model rules from the National Association of Insurance Commissioners (NAIC), which many states base their regulations on, lump-sum specified disease coverage is paid as a one-time payment within 30 days of the insurer receiving proof of diagnosis. Check your own state's rules and the policy for the exact terms.
How it differs from health insurance
- Health insurance pays providers for your care. Critical illness insurance pays you, and you decide how to use the money.
- It is supplementary coverage. Under the NAIC's model rules, specified disease coverage must be payable in addition to, and regardless of, any other coverage you have. It adds to your health insurance; it does not replace it.
How the money can help
- Deductibles, copays and coinsurance.
- Travel and lodging for treatment away from home.
- Mortgage or rent, car payments and household bills while you are off work.
- Childcare or help at home during recovery.
What to compare before you buy
- Which conditions are covered, and how each is defined.
- How much each condition pays. Some pay the full amount for some conditions and a share for others.
- Waiting periods after you enroll before coverage begins.
- Whether a second diagnosis can be paid, and on what terms.
- Pre-existing condition rules.
When you apply, you should receive an outline of coverage that sets out the benefits; in some states insurers must also give you an approved buyer's guide. Read both before you sign.
Who considers it
People with a high-deductible health plan, a family history of a covered condition, or little savings set aside for a medical emergency often find it worth a look. Federal employees can learn how it fits with their other benefits in our guide to federal employee insurance.