A serious illness can be challenging not only for your health but also for the lifestyle you’ve created. An extended hospital stay can mean more medical expenses that aren't covered by your insurance, potential childcare costs, travel expenses for family members, and more.
While you can’t predict the future, you can plan for some financial help if the worst were to happen to you.
“The nice thing about critical illness [insurance] is that generally there’s a lump-sum payment,” explains Jeff Baechle, vice president of Individual Market Product Strategy at UnitedHealthOne. “The policyholder is now the owner of those dollars.”
That means the policyholder has the flexibility to determine the best way to use that benefit amount beyond just paying for out-of-pocket medical bills, prescriptions, and health insurance deductibles (the amount of money you pay before insurance kicks in).
Critical illness insurance payments can also be used for childcare, groceries, mortgage or rent, utility payments, and more to help ease your financial burden while you focus on your recovery.
As with any insurance policy, it’s important to read the fine print and understand exactly how the coverage works. Below are 5 things you should know before purchasing critical illness insurance.
A serious medical condition can quickly bust your health care budget. Learn how critical illness insurance can help you balance it again.
1. Critical illness insurance is not medical insurance
Before you learn what critical illness insurance is, you should understand what it is not: medical insurance. “This coverage is not meant to stand alone,” Baechle says. “It’s meant to be supplementary or complementary to other forms of coverage.”
But critical illness insurance can supplement a high-deductible medical insurance plan by providing funds to help cover out-of-pocket medical costs that could add up if you were in the hospital for a long period of time.
Critical illness insurance is also different from disability insurance. “Disability [insurance] is more tied to someone’s ability to work and may [include] periodic payments during the time someone can’t work,” Baechle says. You can have both policies in place at the same time.
2. Every policy covers different types of illnesses
It’s important when choosing a policy to know what illnesses the policy covers. “The range of what’s covered can be vast,” Baechle says.
Many insurance company policies might not cover a pre-existing medical condition. For example, if you had cancer in the past, the critical illness policy might not cover cancer if it comes back. But it might cover another critical illness, like a heart attack or stroke, that occurs while you have the policy.
Some policies are also known as “one-time pay.” This means that once the policy is paid out for a critical illness, the policy is canceled, even if the holder gets another critical illness in the same year.
Understanding what’s covered by the policy and how the policy works in a calendar year can help you make the best choice for your family.