Critical illness insurance is an extra layer of protection.
Critical illness insurance is a type of supplemental insurance that pays out a lump sum if you are diagnosed with a covered illness, such as a heart attack, stroke or cancer. Covered illnesses vary by insurer. Some policies may also pay out if you require certain surgeries, such as organ transplants.
Unlike health insurance or disability insurance, critical illness coverage pays out regardless of whether or not you have other types of coverage in place. It can be used for any purpose—such as medical bills and day-to-day living expenses—should you unexpectedly become sick with one of the illnesses covered by your policy.
You may want to consider this extra layer of protection if:
Disability insurance provides a benefit if you are unable to work.
Disability insurance is something we should all have in place. If you’re disabled for longer than 30 days, receiving care and taking time off of work is costing you money. By paying an amount of money every month to an insurance provider, you are able to receive medical assistance if needed. Disability insurance will also protect yourself from having to pay out-of-pocket medical expenses that require ongoing treatment. Medicare does not pay for long term hospital stays and the average stay in a hospital is only around 25 days.[2]
Health insurance can help cover medical bills.
You can get health insurance from:
- Your employer or a family member’s employer
- The Health Insurance Marketplace, where you can enroll in a public or private health insurance plan
- Medicaid, if you qualify for it (you may qualify if your income is below 138% of the federal poverty level)
Health insurance covers most doctor visits, hospital stays, and treatments. It may pay for some prescription drugs, preventive care, mental health services, substance abuse treatment and maternity care; it also typically covers emergency care.
Long-term care insurance can cover long-term care costs.
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Employer-sponsored health benefits often include disability coverage and long-term care coverage.
Employer-sponsored health benefits often include disability coverage and long-term care coverage, which can provide much of the same protection as critical illness insurance but are less expensive.
There are many benefits of employer-sponsored health benefits.
Supplemental Medicare may help pay for some expenses not covered by Medicare.
Medicare Part A and Medicare Part B are the federal government’s health insurance programs for people who are 65 or older. They pay for many of your medical expenses, including hospital stays, doctor appointments, surgeries and procedures. However, they don’t cover everything—not even close.
The typical Medicare enrollee spends about $5,000 a year out-of-pocket on medical costs not covered by Medicare Parts A and B, according to a study from America’s Health Insurance Plans (AHIP). The out-of-pocket costs can be much higher if you have significant medical bills.
Fortunately, you may have several options for reducing your out-of-pocket costs when paying for health care as a senior. Among them:
- Medicare Advantage plans: These are offered by private companies that contract with Medicare to provide additional coverage beyond Original Medicare (Parts A and B). Some plans include prescription drug coverage but all of them include things such as vision coverage and dental services that Original Medicare doesn’t cover. If you enroll in a Medicare Advantage plan instead of Original Medicare you probably won’t have to pay the monthly premium for Part B because the plan covers that expense. However there may be other premium charges depending on what kind of plan you choose. You may also have deductibles and co-pays associated with using your benefits under the plan but if you use it wisely those should be modest amounts compared to what would otherwise be paid without the supplemental coverage from an advantage plan.
- Medigap Supplemental Insurance: These policies are sold by private insurers and can help pay for some or all of these expenses not covered by Original Medicare (parts A & B) such as co pays or excess charges incurred under part B as well as providing coverage for emergency travel outside the US which is not covered by original medicare because it is only available within US borders except in special circumstances
Is critical illness insurance a good fit for you?
When considering whether critical illness insurance is a fit for you, you need to think about a few key things.
- Understand what is and isn’t covered. You want to be sure that the illnesses that you are concerned about are covered by your plan.
- Know how much your plan will cost. How much it costs monthly may not matter as much when compared to how much coverage you will receive, but it’s important to understand what you’re paying for.
- Know how much coverage your policy will provide in the event of a critical illness. If you pay less upfront, there is likely a chance that your payout will be less than someone who paid more into their policy.
What is critical illness insurance and how does it compare to other options?
Critical illness insurance is designed to help you financially if you are diagnosed with a serious medical condition. If you have CI insurance and are diagnosed with one of the illnesses listed in your policy, the insurer will pay you a pre-determined lump sum. Note that critical illness insurance is not the same as health insurance. Health insurance covers your regular medical expenses, whereas critical illness insurance is meant to supplement your income during a significant period of disability or recovery.