Critical Disease Insurance

A critical illness is devastating to individuals in many ways. The most obvious is the person's risk of dying due to the illness, which is scary for both the sick person and that person's family and friends. A critical illness is also devastating financially, and many people are thrown into bankruptcy because of mounting medical bills. Critical disease insurance was created to help people pay for these diseases without being left in financial ruin.

Types

• Critical disease insurance covers diseases that are financially detrimental to individuals. The three main diseases covered by critical disease insurance are cancer, heart attack and stroke. There are many other diseases, however, that may be covered. According to the American Association for Critical Illness Insurance, these diseases/conditions include heart transplant, coronary bypass surgery, angioplasty, kidney failure, major organ transplant and paralysis.

Significance

• Critical disease insurance was created in the 1990s to help individuals pay for the financial expenses that accompany major illnesses. In addition to surgery, recovery treatment and long term prescriptions following an illness, there are other bills that people still have to pay to live comfortable lives, including mortgage, groceries and other insurance bills. By providing a lump sum of cash, individuals are aided in dealing with these financial needs.

Features

• The amount of money a person receives depends on the condition he or she has. No matter what the condition, however, critical disease insurance will pay a lump sum of money that is tax-free. Some insurers may also provide multiple cash sums for different diseases, such as if a person has cancer and then has a heart attack years later. Payments can range anywhere from $10,000 to $1 million per the American Association for Critical Illness Insurance.

Benefits

• There are multiple ways to put the money received from critical disease insurance to good use. For example, the money can go towards medical treatments that are not covered by a health plan. In many health care plans, prescription medications are not covered and can become very expensive for individuals. The money can also be used to pay bills for the mortgage, car and other insurance premiums. Another way people use critical disease insurance is replacement of a spouse's income while he or she stays home to care for the sick individual. These benefits greatly assist people who would otherwise suffer financially from a certain illnesses.

Cost of Insurance

• The cost of critical disease insurance varies from insurer to insurer, and it is based on four factors: how much cash the person wants, how old the individual is, the person's health at the time of application, and whether or not the person smokes. The cost is automatically higher for a person who smokes since smoking increases the risk for critical diseases such as cancer, heart attack and stroke.