Key takeaways

  • Critical illness insurance provides a lump sum payment upon diagnosis of a serious illness, helping cover medical and nonmedical expenses that standard health insurance might not fully cover.
  • You may purchase critical illness insurance to prepare for potential future illnesses, especially if you have a family history or an increased risk of developing specific conditions.
  • The cost of critical illness insurance varies based on age and coverage amount, with younger individuals typically paying lower monthly premiums compared to older adults.

With CI insurance, you get a one-time payment after receiving a diagnosis of a covered condition like a heart attack, stroke, or cancer.

You don’t have to show receipts or prove how you spent the money. You can use it however you need. Read on to learn more about what CI insurance is, what you can use it for, and whether you might benefit from enrolling in a CI insurance policy.

Many CI policies use “first after” rules, meaning coverage begins with your first diagnosis after purchase. This means that CI insurance wouldn’t be suitable for an existing illness (preexisting conditions). Instead, it’s a plan you get in case you become ill in the future.

Some CI plans may only cover one specific condition, while other plans may cover multiple conditions. In addition, some plans may include limits or waiting periods before your full benefits apply.

Once you’re covered, the amount you get will depend on your plan, but it tends to range from about $15,000 to $30,000.

You can use this money to pay off out-of-pocket medical expenses left over after your main health insurance plan kicks in, such as deductibles and coinsurance, or pay for medical treatments not covered by your regular insurance.

In addition, you can use the money for any other nonmedical expenses, such as your:

  • mortgage or rent
  • household bills
  • car payments
  • child care costs
  • travel costs

Anyone can purchase CI insurance. In the United States, CI insurance is a type of specified disease coverage, meaning it only covers a specific condition or a set of conditions. You must be currently healthy to enroll, but your plan will only pay out in the future if you become ill with one of the covered conditions of your plan.

So, for example, if you or your doctor believes you have a higher chance of developing a certain form of cancer in the future, you can purchase a plan now that covers this cancer.

Most CI plans include coverage for major conditions such as heart attack, stroke, kidney failure, and major organ failure. Some plans may also offer partial benefits for less severe illnesses like early stage cancer or mild coronary artery disease, or other conditions, such as Alzheimer’s disease, multiple sclerosis, benign brain tumors, and even some infectious or mental health conditions.

Many insurers rely on specific medical definitions of conditions, often sourced from recognized medical boards, that clearly list which conditions are and aren’t covered. That said, there are nationwide standard definitions, which means that each insurer decides what illnesses and events are covered by their plan.

For illnesses without clear diagnostic standards, insurers often use a combination of medical diagnosis and evidence of treatment or disability to determine your eligibility for benefits.

The cost of CI insurance involves paying a monthly premium. For example, according to Protective, which provides CI insurance to members of the American Dental Association (ADA), a 40-year-old insured in their plan typically pays about $2.47 per month for every $5,000 of CI coverage. So if your plan’s lump sum is $30,000, you’d pay about $14.82 a month for your plan.

That said, while younger people generally pay less, older adults may pay more. Past the age of 65, the cost rises to over $12 per $5,000, or around $72 in total, or higher per $30,000.

Critical illness insurance providers

Many commercial health insurance providers also offer CI insurance. Examples include:

  • Anthem
  • Aflac
  • Cigna
  • Guardian Life
  • The Hartford

Nevertheless, this is still a relatively small amount compared to the premiums of commercial health insurance plans, which generally range from several hundred dollars to several thousand dollars a month.

In addition, your total, exact monthly cost will depend on your specific plan and whether it also insures your spouse or your dependents.

Generally speaking, anyone might benefit from getting CI insurance. If you’re not currently ill but have a family history of qualifying medical conditions or are at risk of developing a condition for any other reason, you may consider purchasing such a plan.

This is because even if you have medical insurance, your plan may not be able to cover all your medical or nonmedical costs in the event of such an illness. On the other hand, if you’re an older adult, you may have to pay more for a CI plan.

Pros

  • grants additional financial support in the event you become seriously ill
  • benefits can be used for any expense, both medical and nonmedical
  • tends to have low premiums

When deciding whether to get CI insurance, it’s a good idea to understand the difference between this type of insurance plan and other health insurance plans. Some common types of supplemental health insurance you might encounter are:

  • Life insurance: This pays out money to your family, such as your spouse or children, on the event of your death
  • Disability insurance: This provides income if you can’t work due to a short — or long-term disability, helping you manage essential living costs.
  • Hospital indemnity insurance: This pays for expenses specifically related to a hospital stay, including deductibles, copays, and other costs like child care or travel.
  • Accident insurance: This pays cash to cover costs related to injuries from an accident, such as emergency care, tests, and therapy.
  • Cancer insurance: This provides deeper coverage specifically for cancer-related expenses like chemotherapy, surgery, and hospital stays.
  • Long-term care insurance: This covers ongoing financial support if you’re currently living with a disability or chronic illness and fulfill certain criteria
  • Medigap: For people enrolled in Original Medicare (parts A and B), Medicare supplement (Medigap) plans can help pay for any remaining out-of-pocket costs.

Medigap versus critical illness insurance

If you’re enrolled in Medicare and have also purchased a Medigap plan, your plan could be sufficient to cover your out-of-pocket medical costs.

This depends on the type of illness you’re at risk for and what coverage Medicare provides for this condition. That said, Medigap plans cannot pay for nonmedical expenses.

CI insurance provides you with a lump sum payment if you receive a diagnosis of a serious illness, helping cover both medical and everyday expenses that your regular health plan doesn’t pay for.

You’ll receive a one-time payment after receiving a diagnosis of a covered condition, such as cancer, heart attack, or stroke. You can use the money however you need.

CI insurance can be a good option if you have a family history or a higher risk of serious illness, since your regular health insurance may not cover all the costs. Keep in mind, though, that if you’re older, your premiums may be higher.