Critical Illness

Critical Illness

What Is A Critical Illness ?

For purposes of this explanation, we are going to list those illnesses that are covered by critical illness insurance policies. The three primary are: cancer, heart attack and stroke. The Critical Illness Accelerated Benefit Rider provides you access to your policy’s death benefit if you have one of the qualifying critical illnesses or conditions as specified below. There may be a waiting period during which your policy must be in-force before the benefit from this rider is available.

Qualifying Critical Illness

Critical illness insurance policies may also cover such conditions as

  • Heart Attacks or transplant
  • Stroke
  • Invasive Cancer
  • Coronary bypass surgery
  • Blindness
  • Angioplasty
  • Kidney (Renal) failure
  • Major organ transplant
  • Paralysis

Critical Illness Benefit

If you have a qualifying critical illness, you can file a claim and accelerate all or a portion of your policy’s death benefit. Your benefit will be paid in the form of a lump sum payment. The actual critical illness accelerated benefit amount available to be paid as an accelerated benefit will be based on our determination of the expected future mortality of a qualifying insured at the time an accelerated benefit claim is made. Under certain circumstances where an insured’s mortality (i.e., our expectation of the insured’s life expectancy) is not significantly changed by a Qualifying Critical Illness, the accelerated death benefit may be zero.

If a benefit under the Critical Illness Accelerated Benefit Rider is payable, we will provide you with one opportunity to elect a Critical Illness Accelerated Benefit Amount as to the occurrence of the Qualifying Critical Illness in question. To make such an election, the Owner must complete an election form and return it to insurance company within 60 days of the owner’s receipt of the election form. For example, if you have a qualifying heart attack, you will be provided an opportunity to elect a Critical Illness Accelerated Benefit Amount if you file a claim. If you elect not to receive an Accelerated Benefit, you will not be able to elect another Critical Illness Accelerated Benefit Amount for the same heart attack. However, if you have another qualifying illness event later, you can still choose to accelerate your remaining death benefit.

If, as to the occurrence of a Qualifying Critical Illness, You decide not to elect a Critical Illness Accelerated Benefit or if You decide to elect to receive less than the maximum Accelerated Benefit available for such Qualifying Critical Illness, You cannot thereafter elect a Critical Illness Accelerated Benefit and receive an Accelerated Benefit for the same occurrence of such Qualifying Critical Illness.

Why Was Critical Illness Insurance Created ?

Here is the short answer: Critical illnesses cause financial devastation to millions of individuals and families (even those with health insurance). A product was created that would provide cash at a time it was needed most.

For those who want a lot more information. Consider the following: Medical problems contributed to over 60 percent of all bankruptcies in the United States and a 2008 Harvard University study found that more than three-quarters (77.9 percent) had health insurance at the start of the bankrupting illness. This study was performed prior to the current economic downturn and will likely understate the current burden of financial suffering.

Critical illnesses are striking more Americans every single year. Some 1.4 million Americans are diagnosed with cancer (American Cancer Society). An estimated 785,000 Americans will have a first heart attack and some 600,000 Americans will experience their first stroke (American Heart Association). The vast majority will survive.

The financial consequences of surviving a critical illness are something few people are prepared for. Most health insurance policies come with deductibles and co-pays that can be as much as $5,000 a year. Prescriptions are not just costly, they are rarely fully covered.

And, here is something you likely have not considered; while you are undergoing treatment or recovering for an extended period of time, you will still have to pay your health insurance premiums. You’ll pay insurance, rent or mortgage, credit card bills, school tuition, real estate taxes, food and utilities.

According to the Harvard study, many families with health insurance found themselves under-insured and responsible for thousands of dollars in out-of-pocket costs. The average out-of-pocket cost was $17,749 for all medically bankrupt families. Because most health insurance is linked to employment, a medical event can trigger loss of coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged $22,568.

In the late 1990s, a new financial product was developed to help consumers cover expenses associated with critical illness. Appropriately, it’s called Critical Illness Insurance. This specialized insurance provides a lump-sum, tax-free payment should a policyholder suffer from certain specific critical conditions.

Some 600,000 Americans now have this protection purchased on an individual basis or through a plan offered by their employer.