Critical illness insurance offers you a monetary payout if you are diagnosed with a serious illness. Such insurance helps ensure that you aren’t left insolvent if you experience a catastrophic illness.
What is it?
Insurance for critical illnesses is a supplemental insurance policy that is often offered as an option in a workplace benefits package. Though the employer won’t pay for the coverage, it usually can offer it to you more cheaply because it will get group rates from the insurer.
Who is it for?
Insurance for critical illnesses is for anyone, but it may be more appealing to someone who could be financially devastated by a serious illness. That could include single people or people who support a family.
How does it work?
Critical illness insurance usually works like this: If you are diagnosed with cancer or another illness that is covered in your policy, the insurance company will pay out the lump sum that is set forth in the policy. You may get to choose how big that lump sum will be when you take out the policy, and your premiums will be higher if you choose a higher payout. You can then use that money for whatever you want: to pay medical bills, to live off of while you can’t work or for another purpose.
Different types of coverage
Most critical illness policies are the same, although some policies may cover more or fewer diseases. The policies also can differ based on whether you buy them through your job or in the individual market.
The main benefit of a critical illness policy is that you have a backup source of income if you are stricken by a serious illness and have to miss significant amounts of work. Another benefit is that the policy doesn’t cost very much to have, especially if you are able to get it through work and pay group rates.