“travel Insurance 101: A Comprehensive Guide For Australian Travelers” – If you’re lucky, you’ll probably never need to use critical illness insurance (sometimes called catastrophic illness insurance). Maybe you’ve never heard of it. But in the event of a major health emergency like cancer, heart attack or stroke, critical illness insurance is the only thing standing between you and financial loss.

Most people assume they are fully protected with a standard health insurance plan, but the costs of treating life-threatening illnesses are usually more than any plan covers. Read on to learn more about critical illness insurance and whether it’s something you and your family should consider.

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As the average life expectancy in the United States continues to rise, insurance brokers are finding ways to make sure Americans can afford to age right. Critical illness insurance was developed in 1996 as people realized that surviving a heart attack or stroke would leave a patient with unaffordable medical bills.

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“Even with excellent medical insurance, just one critical illness can be a tremendous financial burden,” says certified financial planner Jeff Rossi, former director of talent development at Santander Bank in New York. Critical illness insurance provides a benefit if you experience one or more of the following medical emergencies:

Because these illnesses require extensive medical care and treatment, their costs can quickly overwhelm a family’s medical insurance policy. If you don’t have an emergency fund or a health savings account (HSA), you’ll have a harder time paying those bills out of pocket.

Many people are now opting for high-deductible health plans, which is a double-edged sword: Consumers benefit from relatively affordable monthly premiums, but they can find themselves in a real pinch if a serious illness strikes.

Critical insurance can pay for expenses not covered by conventional insurance. The money can also be used for non-medical expenses related to illness, including transportation, child care, etc. Typically, the insured receives a lump sum to cover those costs. Coverage limits vary—you may be eligible for a few thousand dollars up to $100,000, depending on your policy. The cost of a policy is affected by many factors, including the amount and extent of coverage, the insured’s gender, age, and health and family medical history.

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There are exceptions to critical illness insurance coverage. Some types of cancer may not be covered, but chronic illnesses are also often excluded. You may not receive payment if a disease returns or if you suffer a second stroke or heart attack. Some coverage may end when the insured reaches a certain age. So, as with any type of insurance, make sure to read the policy carefully. The last thing you want to worry about is your emergency plan.

You can buy critical illness insurance on your own or through your employer (many offer this as a voluntary benefit). You can also add it as a rider to your existing life insurance plan, which can be a more affordable option with the same benefit.

One of the reasons companies are interested in adding these plans is that they recognize that employees are concerned about higher out-of-pocket costs with a high-deductible plan. Unlike other health care benefits, workers typically cover the entire cost of critical illness plans. This saves both companies and workers money.

The big draw of critical illness insurance is that the money can be spent on a variety of things, including:

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What makes these policies attractive is that they usually don’t cost much, especially when you get them through an employer. Some of the smaller plans run as little as $25 a month, which seems like a bargain compared to the cost of a regular, low-deductible health insurance policy.

Some health care experts are skeptical that it’s really a good deal for consumers. A broader concern is that they will only reimburse you for a somewhat narrow range of illnesses. If your diagnosed illness doesn’t fit the definition of a covered illness, you’re out of luck.

The more illnesses your plan covers, the higher the premiums you will have to pay. An individual, a 45-year-old woman with a cancer-only plan might pay $40 a month for $25,000 in coverage. If the same woman expands the coverage to include coronary diseases, organ transplants and some other conditions, she can pay twice a month.

Like all insurance policies, critical illness policies are subject to a number of terms. They only cover the conditions listed in the policy, but they cover them only under certain conditions specified in the policy. A diagnosis of cancer, for example, may not be sufficient to trigger a policy payout unless the cancer has spread beyond an early stage or is life-threatening. A diagnosis of stroke does not trigger payment unless neurological damage persists for more than 30 days. Other limits may include a certain number of days the policyholder must be sick or survive after diagnosis.

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Seniors should pay special attention to these procedures. Some policies may have payout limits, people of a certain age (75 years) are ineligible for payouts, or they may have so-called “age reduction schedules,” meaning your potential insurance payout decreases as you get older.

It is important to note that most of these policies do not provide guaranteed payout. For example, a typical insurance company states in its critical illness policy that “the expected benefit ratio for this policy is 60%. This ratio is the portion of the future premium that the company expects to return as profits when averaged over all individuals holding this policy.” If 60% of premiums are eventually paid in claims, 40% of premiums are never paid.

Insiders point out that there are alternative forms of coverage without these restrictions. Disability insurance, for example, provides income when you are unable to work for medical reasons, and financial protection is not limited to a narrow set of illnesses. This is a good option for anyone whose livelihood is significantly affected by prolonged inactivity.

Consumers with a high-deductible plan can also make contributions to a Health Savings Flexible Spending Account (FSA), both of which offer tax benefits when used for qualified expenses.

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You can also build a separate savings account to cover non-medical expenses that may arise if you have cancer and take time off from your job.

Critical insurance is a policy that pays a direct lump sum benefit that you can use to pay for expenses not covered by other insurance. You can buy it yourself or through your employer or add it to your personal life insurance plan.

Critical insurance helps with bills related to life-threatening illnesses like heart attack, stroke or cancer. At your discretion, the benefit from a critical illness policy can cover anything from medical expenses not covered by the health care policy to household bills for utilities, rent or mortgage payment, or grocery bills.

Coverage is usually limited to medical emergencies like heart attack, stroke, kidney failure, cancer, stroke and some other complications. Each plan has a specific list, which varies from plan to plan.

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Critical Illness Insurance provides a lump sum when you are diagnosed with an illness covered under the policy. The payment can be spent on non-medical expenses such as mortgage payments, transportation or equipment, or any necessities such as vacations while you recover. The premiums are low and affordable compared to a regular health insurance policy.

Some types of cancer may not be covered, and chronic illnesses are often excluded. Recurrences of serious illness, such as a second stroke or heart attack, may not receive payment. Coverage may end or be reduced when the insured reaches a certain age. As some critical illness policies set narrow limits, it is important to note the specific conditions that the policy covers.

Since medical bills are a common cause of bankruptcy in the United States, this type of policy may be worth the time to research, especially if you have a family history of any of the above illnesses. Critical illness insurance can alleviate some of the financial anxiety if you are unable to work. This gives you some flexibility in using the money you paid to cover a wide variety of potential needs.

However, there are some drawbacks and stipulations to this type of insurance coverage. Even with a family history of a particular condition, you may find that other types of insurance better meet your needs. As with all types of insurance, you should shop around to find the policy that best fits your needs and situation. Disability insurance may be the best option because the benefits are more comprehensive and they pay out over a longer period of time.

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