Be ready: What is critical illness insurance, and how can it help you?

Part of our “Be Ready” series of articles exploring workplace supplemental health benefits — and how they can help you be better financially prepared when the unexpected happens.

A diagnosis of a covered critical illness, such as cancer, stroke or heart attack, may affect both your health and your finances. 

Fortunately, critical illness* insurance is an option that could help by paying a benefit if you are diagnosed with a covered illness or condition.

What is critical illness insurance, and how can it help me?

Primary health insurance may cover many treatment costs of a serious illness, but you may still be responsible for out-of-pocket expenses such as copays, deductibles and other everyday cost of living. Critical illness insurance can provide a benefit directly to you — not your provider — that you may use to help with eligible expenses after a covered diagnosis.

Critical illness insurance is a type of optional coverage (known as “supplemental health insurance”) that pays a benefit when you are diagnosed with a covered illness or condition. It doesn’t replace your health insurance but, rather, complements it.

If you are diagnosed with a covered illness or condition on or after your coverage effective date, the benefit is paid directly to you and can be used however you decide. Critical illness insurance can lessen the financial impact of the out-of-pocket expenses you may experience if you become seriously ill.

There may be exclusions and limitations to your coverage, so be sure to check with your employer or review your certificate of insurance and any riders for the complete provisions of your coverage. It's also important to know that critical illness insurance is not health insurance and does not satisfy the requirement of minimum essential coverage under the Affordable Care Act.

What does critical illness insurance cover?

Coverage will vary by plan but, as an example, here are some of the diagnoses and conditions that could be covered by a critical illness insurance policy:

• Heart attack
• Cancer
• Stroke
• Coronary artery bypass
• Major organ transplant
• Pacemaker placement
• Parkinson’s disease

A pre-existing condition limitation and other exclusions may apply. For a complete description of your benefits — along with applicable provisions, conditions on benefit determination, and exclusions and limitations — you would want to reference your certificate of insurance and any riders.

How can I get critical illness insurance?

Critical illness insurance is offered through your employer. You can usually enroll when you start a new job and make your other benefits selections or, after that, during your employer’s annual enrollment period. Critical illness insurance premiums are then paid by you through payroll deductions, which are often made post-tax.

Who can be covered under my plan?

In addition to yourself, Critical illness insurance can also cover your spouse and your children. The definitions of “spouse” and “children” may vary by plan or by state, so talk with your employer to verify who can be covered on your plan. You will likely need to be enrolled in order to cover your spouse and children.

One more thing to consider: The workplace benefits and savings potential

Whether you’re just learning about supplemental health benefits like critical illness insurance or actively planning to enroll in them, have you ever thought about how these coverages have the potential to impact your retirement savings?

Critical illness insurance is a separate insurance product with a distinct purpose and a benefit that is paid for the diagnosis of a covered illness. However, it may help lessen the financial impact of a serious illness diagnosis and, perhaps, it will help you maintain your savings or potentially avoid having to take a hardship withdrawal as you encounter out-of-pocket costs. Considering your workplace benefits and retirement savings together could help you make more informed financial decisions, for today and tomorrow. 
 

Check with your HR department to find out if you have the option to enroll in critical illness insurance during your employer’s next open enrollment period.