Your health insurance may not be enough if you are diagnosed with a serious illness. While your health insurance will cover most of your medical bills, it won’t help you if your illness prevents you from working. In that case, it helps to have critical illness insurance.
What is it?
A critical illness policy is an insurance policy that pays you either a lump sum or monthly payments if you get a serious illness. The policies typically cover illnesses that are life-threatening, such as cancer. An insurance policy for critical illness is something that employers often offer as an extra benefit that employees can pay for.
Who is it for?
A critical illness policy makes good sense for everyone, but it makes particular sense for certain people. For example, a critical illness policy would be a good idea for a parent who is the sole breadwinner in the family because if that person was unable to work, it could be very hard on the family.
How it works
A critical illness policy pays the insured person the amount of money set in the policy if the person is diagnosed with a condition covered in the policy. The insured person typically can use the money for whatever he or she wants, although policy language may differ.
Different types of coverage
Critical illness insurance typically pays a set amount as a lump sum if the insured person is diagnosed with a disease covered in the policy. However, there are some policies that pay health-care providers directly to cover costs not paid for by other forms of insurance. There are standalone critical illness policies, and such coverage also can be obtained as a rider on another type of insurance policy, such as life insurance or disability insurance.
The biggest benefit of a critical illness policy is that it provides money to help pay for a major illness. Even if you have health insurance, it may not cover certain treatments for a disease like cancer. And if your illness is disabling, a critical illness policy will provide money to replace lost income.