What Is Critical Illness Insurance?

Updated · Jun 28, 2022

Illness can strike at any time, and if it does, the treatment costs add up quickly. Even a short hospital stay can leave you with tons of medical bills.

And health insurance isn’t always enough to cover severe diseases.

Critical illness insurance is one way to ensure you can take care of yourself and your loved ones.

But what does it cover?

Is it the right option for you?

We outline the pros and cons to help you decide.

What Is Critical Illness Insurance?

If you have critical illness coverage and get diagnosed with a disease specified in the policy, the insurance provider will pay out a benefit.

You can use the money to pay for the treatment, make up for lost income, or cover other expenses.

You can get a critical illness plan as supplemental coverage to your health insurance. It will add a range of conditions that your current plan doesn’t cover.

Even though it includes a limited number of illnesses, this type of policy can provide much-needed financial security in the event of a serious health issue.

How Does Critical Illness Insurance Work?

If you’re diagnosed with a critical illness and your plan does cover it, you can submit a claim to the insurance company.

It will review your request and pay out a lump sum directly to you if you meet the criteria.

Then, you can decide how you will spend the money:

  • Cover medical expenses
  • Try out an experimental treatment
  • Buy medication, and so on

But you’re not limited to medical bills. The aim of this type of coverage is to get you through a tough time.

So, for instance, if you can’t work temporarily due to an illness, you can use the money to pay your rent, buy food, and so on.

What Does Critical Illness Insurance Cover?

Each provider and plan may cover slightly different conditions. But these are the most common ones:

  • Cancer
  • Heart disease
  • Stroke
  • Organ transplant
  • Kidney failure
  • Paralysis

What Is the Cost of Critical Illness Insurance?

Critical illness policies are very affordable—especially compared to health insurance.

And if you get them through your employer, the price will be even lower.

That said, the cost can vary significantly. It depends on the insurer and the policyholder’s age, health, and lifestyle.

Plus, the more conditions it covers, the bigger the premiums will be.

Insurance companies are relatively flexible in the type and amount of conditions you can cover.

You can choose one disease or get cancer, heart surgery, and stroke insurance, for example.

Pros and Cons of Critical Illness Insurance

What are the benefits of critical illness insurance?

  • It covers severe conditions, such as cancer and heart diseases
  • Pays out a lump sum benefit that you can use however you want
  • Covers conditions with very costly treatment, where health insurance simply won't suffice
  • It’s affordable

What are the disadvantages of critical illness insurance?

  • It covers a limited range of conditions
  • The benefit may not be enough to cover all of your expenses
  • There's a waiting period before you can receive benefits
  • It doesn’t cover pre-existing conditions

Do I Need Critical Illness Insurance?

Supplementing your health insurance with critical illness coverage is a smart choice for your health and finances.

All the same, it is not the best choice for everyone and in every situation.

If you are at hereditary risk for certain conditions that your health insurance doesn’t cover, it is certainly a good option.

Keep in mind that you can’t use it as a substitute for health insurance.

Make sure you have comprehensive medical coverage first.

Only then consider your options for supplemental insurance.

Wrap Up

What is critical illness insurance?

It is a valuable and affordable addition to your health insurance policy.

But make sure you’re not just tempted by the small premiums.

If you are at increased risk for certain conditions or simply want peace of mind, it is worth it.

Otherwise, it might be better to invest the extra money in a more comprehensive health insurance plan.

Read our full guide for the complete list of pros and cons to see which option is best for you.

Share:
Aleksandra Yosifova
Aleksandra Yosifova

With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.