Is Critical Illness Insurance Worth It? How To Determine Its Value For Your Situation

With a significant rise in various diseases and complex health-related issues rampant, it is essential that an individual should opt for the right health insurance plan. The right health insurance plan may be the difference between financial security or being burdened by unnecessary debt and undue stress.

To definitively answer, “is critical illness insurance worth it?” we must assess your life situation.

The most important factor in determining the value of critical illness insurance is your current medical coverage and opportunity for future coverage.

We cannot control the diseases and sickness that we may have in the future, but you can control the kind of insurance we employ to keep ourselves financially secure.

So how do we do it?

How Critical Illness Insurance Works

Over the years, many health insurance plans have been introduced for the general public. One of the most refined and relatively new of the health insurance plans with great advantages is the critical illness insurance plan.

Here’s the deal about critical illness insurance:

Critical illness insurance is your safety net in case any critical illness strikes you or your loved one.

To save you from any financial burden, your health insurance provider will give you a certain lump-sum amount in case you get affected by any critical illness. As soon as you are diagnosed with a critical illness, you will receive this amount. You are then free to use this amount for any expenditure either relating to your medical care bill or any other expenditure you deem fit. This could include the miscellaneous expenditures like groceries, childcare, day-to-day requirements etc.

Still uncertain?

Critical illness insurance was birthed to give security to those who were left with nothing. Unlike some insurance that starts out with good intentions and ends in a black hole, this insurance has remained relatively unchanged over the years.

How Did Critical Illness Insurance Emerge?

Mostly, individuals are skeptical of various health insurance policies and plan. The main questions that might arise in the mind of consumers are:

  • Why should I get critical illness insurance?
  • What perks will I get out of this?
  • Is critical illness insurance worth it?

To answer these questions, it is important that you know the history of critical illness insurance!

As it goes, a famous and renowned South African heart surgeon Dr. Marius Barnard was the founder of critical illness insurance. Working alongside and treating various individuals, who had critical illnesses, with empathy, he made certain key observations:

He often noticed that the recovery of his patients surviving a critical illness was hindered by the financial burden they felt.

This financial burden included both the medical and non-medical related expenditures.

He felt the need for such an income that would help his patients and their loved ones feel secure in this crisis.

This then led Dr. Marius to present the idea of a critical illness insurance plan to the companies in South Africa. The companies were not very keen to the idea in the start because they found it difficult to price this new form of insurance. However, the idea was widely accepted after quite a few years of intense persuasion on part of Dr.Marius to various insurance companies. Thus a prototype of the refined Critical Illness Insurance Plan we now see was created.

In the initial phase, a few major critical illnesses were included in this insurance plan. These included cancer, stroke, coronary bypass surgery and heart attack. Later on, as the critical illness insurance’s concept spread throughout the world, more and more illnesses were added to the list by different insurance companies.

As Dr. Marius was keenly thinking from the aspect of his patients, it is obvious critical illness insurance must be highly beneficial for the individuals.

What Comes Under the Category of Critical Illnesses?

Critical illnesses are those which have such an acute nature that they have the ability to negatively hamper the way an individual is living his/ her life. As a consequence, not only the individual but the whole family will have to suffer.

The most comprehensive list of all critical illnesses covered by various insurance companies can be divided into these categories:

  • Heart
  • Cancer
  • Other organ failure
  • Other medical conditions

The Massive Impact: Is Critical Illness Insurance Worth It Based on Your Finances?

Finding the value of critical illness insurance

Are you prepared for the after effects of a critical illness? Can you rely on your savings alone?

Here are the alarming facts about medical expenditures in the US:

There has been a sharp incline in the medical bills and expenditure of US Citizens. According to Bureau of Labour Statistics, the rise in the prices of medical care and facilities has reported at being 85% from 2000 to 2018!

This means what had cost you a $1,000 in 2000, will now cost you $1,850 in 2018. Medical inflation has been unreal and far more than any other inflation.

When a certain critical illness strikes, the financial repercussions can be huge. For according to American Cancer Society, in 2014 more than $4 billion was paid for medical expenditures.

Similarly, the cost of heart attack and the resultant treatment can be from $150 – $3,000 for ER and $21,500 for a single day and the total stay can extend to 5 days.

According to a 2016 survey by Go Banking Rates, the US citizens have a perilously low percentage of savings. Almost 60% of the individuals taking part in the survey said that they had less than $1000 in savings.

More than 30% said they had almost no savings.

This means that since most of the individuals can’t rely on their savings alone for any huge medical expenditure, they need an external support factor. Often this is because when you are suffering from critical illness, there is a high chance you won’t be getting any salary.

So the last option is the money you have saved for rainy days. Keeping this in mind, you can easily imagine the worth of critical illness insurance.

Critical Illness Insurance Versus Traditional Health Insurance

Critical Illness Insurance Traditional Health Insurance
Provides you with a lump-sum cash amount immediately after diagnoses. Reimburses you for the expenditure you may have covered after showing the medical bills.
Amount paid can be used for any purpose. The amount goes directly to your medical care provider.
Covers you only in case of any critical illness mentioned in the insurance plan. Covers you comprehensively for hospitalization cost and medical procedures performed.
Long-term policy period Requires yearly renewal
This policy doesn’t continue after the claim is made. This policy has the flexibility of continuation even after claims are made.
A payout might be canceled due to certain conditions not being met exactly according to the contract. For e.g. you won’t be paid for a certain procedure if it wasn’t caused by a disease but rather by an accident. Accidents and various ailments are covered in this policy.
A survival period of 30 days after diagnosed with a critical illness is required for getting the claim. No survival Period is required.
You will not be covered against any critical illness in the initial 90 days period of the policy. Reimburses you for the expenditure you may have covered after showing the medical bills.
Provides you with a lump-sum cash amount immediately after diagnoses. You will not be reimbursed in the starting 30 days of the policy.

How to Determine the Value of Critical Illness Insurance

Critical illness insurance is highly valuable in certain circumstances and made useless in others. There are so many factors that will determine the value of this insurance:

What is the nature of your ailment?

If you are afflicted with a critical illness, a simple medical and health insurance plan will not be advisable for you. A medical and health insurance plan can cover as much and will only pay the medical bills. In such a case, critical illness insurance will be more valuable.

You are afflicted with a severe critical illness but it is not covered by your critical Illness insurance

It is important to go for your medical and health insurance plan here since you will not be covered for an illness that is not mentioned in your plan.

Do you have a medical history of being afflicted with a certain critical illness in the past

In these circumstances, you will neither be viable nor can opt for a critical illness insurance policy and you can only go for a health and medical insurance policy.

What are the causes of the medical treatment or procedure you are going to need?

Critical illness insurance will only cover you for medical treatments and procedures if they are caused by diseases and not by accidents or other violent incidents. In this case, medical and health insurance will come to your rescue.

What type of insurance policy is provided by your employer?

If your employer is providing you with the usual run-of-the-mill medical and health insurance policy, there is a high chance you will lose it. It is so because after facing a severe critical illness, you might lose your job in case it effects your health. Therefore at such a time only critical health insurance will be valuable for you.

Cost & Coverage Associated with Critical Illness Insurance

critical insurance application and coverage

The costs and coverage provided by your critical illness insurance policy can vary and are interlinked. The cover that a plan provides you can vary from $20,000 to $500,000. The cost you might incur will also depend on the following statistics:

  • Your medical history and current health statistics
  • Your family medical history
  • Your age bracket
  • Individual or group/family based policy
  • Your lifestyle

While deciding for critical insurance policy cover ask yourself:

  • Will this amount be enough to pay for my mortgages for a minimum of two years?
  • Will this amount be good enough to support my spouse and children?
  • Will this amount be able to meet the various medical bills for any illness?

The answer to these questions will help you in determining and going for the suitable insurance cover.

Information Required by Insurance Company to Cover You

  • Photographs
  • Identity proof
  • Address proof
  • Age and detailed medical history
  • Income proof and bank details

What are the Other Coverage Options to Protect Your Future?

Critical illnesses can be disastrous for your finances and there are several ways to be prepared for them.

  • Maintain a separate saving account for healthcare and expenditures.
  • Be sure to look out for reliable emergency funds and other investments like stock investments, mutual funds etc.
  • Plan out to seek reasonable credits lines and cheaper loans.

All Factors Included: Weigh Pros & Cons Before Buying Critical Illness Insurance

Much needs to be considered before you make a final decision on whether critical illness insurance is worth it.

You should be able to make a decision if you consider various factors such as age, marital status, current financial status.

It is very important to understand that seeking a safe cover against the various critical illness is almost a necessity, as the medical bills are skyrocketing and savings are dwindling. You can sigh in relief knowing that you have a safety net intact to fall against without the added pressure of finances pulling you down.

By |2018-07-07T19:02:27+00:00June 28th, 2018|Insurance Finances|0 Comments

About the Author:

Matt has a strong background in writing and sees a ton of value in talking with insurance experts that know way more than he does. His own grandmother had a severe stroke several years back, and over the course of a few years, it completely drained her hard-earned retirement.

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