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Critical Illness Insurance

Researcher & Writer
April 10, 2020

Most people who are looking to get a life insurance policy are looking to get one for the coverage that the death benefit provides to their beneficiary. Did you know there are also riders or features of specific policies that you can utilize while you are still alive? 

A big part of this is what life insurance companies call living benefits. There are a few different options that can fall into this bucket, but this article is going to focus on critical illness insurance.

What is critical illness insurance?

Critical illness insurance is a type of health insurance policy that pays out a lump sum cash benefit payment for a qualifying condition, such as cancer, paralysis, heart disease, and stroke.

Therefore, when we refer to the term ‘critical illness insurance’, it’s going to describe the basic notion of paying into an insurance policy so money can be received if you were to suffer from a qualifying illness or injury listed in the policy itself.

Below, we’re going to discuss the different types, some companies offering this product, and what you need to consider when choosing the policy. Our goal is to help you consider the pros and cons of private individual critical illness insurance to supplement your health care needs.

Types of critical illness insurance

Now we know the basics, it seems sensible to start with the different types of critical illness insurance available. For the most part, there are three different policies.

Simplified Issue Critical Issue Insurance

Typically available in smaller amounts, most will push as far as $50,000, a simplified issue insurance critical illness insurance policy means that the requirements are less stringent as they would be on a more traditional life insurance policy.

For example, you won’t be subjected to a medical examination and this is the main reason why people may choose this option.

Instead of requiring a medical exam, the insurance company will ask a few health questions to determine your risk level. 

Although less common, you may also come across association or group plans that offer guaranteed issue critical illness insurance.  With a guaranteed issue policy, the insurance company doesn’t ask medical questions. Guaranteed issue policies often come with graded benefits. Graded benefits mean that you won't receive the full benefit amount until after a certain time period has passed (typically 2-3 years).

Fully underwritten critical illness insurance

When insurance companies use the term fully underwritten, what they really mean is that the process to qualify and get insurance will be more in-depth. 

A fully underwritten critical illness insurance policy will have complete underwriting requiring a medical examination and health questions. The benefit of a fully underwritten policy is the critical illness insurance provider is willing to offer more coverage, and typically at lower premiums.

Critical illness rider

Finally, if you’ve spent any time researching life insurance policies, you’ll know there are opportunities to add life insurance riders. Essentially, these are additions that are paid for on top of regular life insurance premiums.

The critical illness insurance rider is popular and it serves as additional protection in addition to the life insurance death benefit. Rather than having two separate policies with different insurance companies, you are able to get the rider and enjoy life insurance with living benefits.

Things about critical illness insurance to consider

So, you’ve decided to invest in a critical illness insurance policy/rider…what now? If you take anything from today, aside from the value of this policy, you should know that each company adds their own nuances to make the policy their own. With this in mind, we’re going to provide you with some considerations you need to make when choosing an insurer and policy.

Which illnesses are covered?

When you research the market for different critical illness policies, you’ll quickly notice the difference in covered illnesses. There isn't a list of illnesses that each company follows; they provide their own coverage depending on the risk they’re willing to take based on the commonality of such health issues.

Ever since the first policy was introduced many years ago, however, there have been some conditions that appear in the majority of policies. For example, this applies to a heart attack, stroke, major organ transplant, kidney failure, cancer, paralysis, and coronary artery disease. Nowadays, these are the types of critical illnesses people worry about and so the insurance providers generally include these within their offerings.

After this, there are a plethora of other medical concerns they could include and these are more likely to be scattered around the market and between policies. In addition to multiple sclerosis and motor neuron disease, this could include severe burns, Parkinson’s disease, deafness, coma, aplastic anemia, aortic surgery, blindness, Alzheimer’s disease, bacterial meningitis, loss of limbs, loss of speech, HIV infection (occupational), and heart valve replacement.

If you’re looking for something that isn't considered within the main bulk of illnesses, perhaps your family has a history of a certain condition, you might need to scan the market a little harder than if you were just looking for basic coverage of the most common illnesses.

Policy Type

Do you already have a life insurance policy in place? Does your provider offer an opportunity to add a critical illness rider? Are you currently looking for a life insurance policy? Whether you have one or are currently looking to open a life insurance policy, many find value in pairing them together with the same provider. Not only will you have all the coverage you need, it’s all in one place and you might even save yourself some money. Often, the logistics of this make it worthwhile alone (i.e. only one medical examination).

Medical Examination

As we saw when looking through the list of companies offering critical illness insurance, some require a medical examination and some don’t. Do you have a preference? If you’re young and healthy, the medical examination will allow you to obtain more affordable rates. Otherwise, the simplified and guaranteed issue policies might come in handy.

Financial Position

As we know with all medical and life insurance policies, the coverage we need depends on our financial position. If you’ve got a healthy amount of money saved, you might not need as much coverage and you are simply looking for a buffer. Then again, you may consider the leverage you get with the critical illness insurance to be worth the premium you pay in order to avoid touching your own money.

Family Needs

If you’re young and single, your coverage needs are going to be fairly straightforward. As you get older, marry, and have children, your needs change dramatically. Suddenly, there’s more on the line if you were to become ill. Therefore, talk with potential providers and discuss your options to expand/adjust coverage as your needs change. If you cover your needs thinking solely about where you are today you might miss out on locking into lower premiums now, rather than down the road when you are older and the policy costs more.

Critical Illness Insurance Exclusions

It is important to know what the critical illness policy lists as exclusions and pre-existing condition limitations. There are common exclusions, such as

  • You are participating or attempting to participate in an illegal activity
  • You have previously attempted to commit suicide or intentionally self-inflicted injury
  • You are being under the influence of narcotics or any other controlled chemical substance unless administered upon the advice of a physician
  • Your practicing for or participating in any semi-professional or professional competitive athletic contest which you are paid for
  • Your participation in any act of war, whether or not declared, participation in a riot, insurrection or rebellion.

But there may be other exclusions or limitations in your critical illness insurance policy, including pre-existing condition limitations for specific periods of time, such as 90 days. So, don't forget to check the pre-existing condition exclusions before the end of your 30 day free look period to make sure your policy coverage extends to every condition you think it does to make sure you will be eligible for your critical illness benefit.

Top 10 Best Critical Illness Insurance Companies

There are numerous companies offering critical illness insurance, both individual and group. The following list of critical illness insurance companies provide our current favorites. While many companies provide it as an option, we want to focus on the providers we believe currently offer the best critical illness insurance for individuals.

Critical Illness vs Disability Insurance

Critical illness insurance pays a lump sum benefit payment if you are diagnosed with a qualifying critical illness. Some policies allow you to file a claim more than once. The main distinction between critical illness insurance and disability insurance is critical illness insurance gives you a lump-sum payment for a critical illness, not necessarily for disability, although the critical illness may lead to disability.

Disability income insurance pays a monthly income benefit if you are disabled due to a sickness or injury. Disability insurance is primarily concerned with income replacement. You can buy both short-term disability insurance and long-term disability insurance. If you are totally or partially disabled as defined in the policy, the insurer will pay you a monthly income benefit for the duration of the benefit period, after the elimination period has ended.

Critical Illness vs Long-Term Care Insurance

The main difference between critical illness insurance and long-term care insurance is that with critical illness insurance, you have to have a qualifying critical illness. With long-term care insurance, you have to be diagnosed with a chronic illness, defined by being unable to do 2 of 6 activities of daily living or having severe cognitive impairment.

Next Steps

Do you have a critical illness plan? If you are interested in critical illness insurance quotes, our agents are standing by ready to provide you with customized quotes based on your specific need, health and lifestyle. We are not bound to any specific company and can shop from the different carriers we represent to find you the best policy based on your specific criteria.

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We are a team of life insurance experts with the simple mission of helping you find the best coverage for your unique situation. We research, review, and rank life insurance companies to make that process easier.