Modern medical advances have allowed people to live longer. However, with increased lifespans come higher odds of experiencing critical illnesses, such as cancer or heart failure. The cost of experiencing a critical illness can multiply quickly. Even if a person survives cancer, for example, ongoing care can quickly become very costly.

What Is Critical Illness Insurance?

Critical illness insurance is activated if you are diagnosed with a critical illness. 

After you are diagnosed with and survive a critical illness, your policy should pay a lump sum to you – often within 30 days of diagnosis. This waiting period after the critical illness is called the survival period – meaning you have survived the critical illness and are eligible for insurance payout.

However, by the end of the survival period, you must still be affected by the critical illness. If completely recovered from the illness at the end of the period, you will be ineligible for critical illness benefits and you will not receive the lump sum payment.

What Expenses Are Eligible for a Critical Illness Lump Sum Payment?

Critical illness policies are flexible regarding the use of the lump sum payout. The lump sum may be used in various ways. The money can cover a variety of expenses such as: 

- Medical expenses you have incurred that are not covered by other health insurance 
- Everyday living expenses 
- Mortgage payments 
- Loan payments, bills, or other obligations 
- Related transportation costs or retrofitting costs (such as, if a vehicle needs retrofitting for the person) after a person suffers a critical illness. 

The cost of a critical illness spills over into all of your finances – so the flexibility of this type of insurance means the ability to apply the money to the areas in your life most impacted by the cost of critical illness. You can pay medical bills or pay the mortgage, and concentrate on recovering.

What Does Critical Insurance Cover?

Conditions covered under critical illness insurance may result from injury, disease, or some major surgeries. A critical illness insurance policy may cover the following conditions: 

- Heart attack 
- Stroke 
- Kidney failure 
- Paralysis 
- Conditions that result in being unable to live independently 
- Coronary bypass 
- Loss of sight, speech, or hearing 
- Severe burns 
- Organ transplant 
- Alzheimer’s disease 
- Coma 
- Multiple Sclerosis 
- Cancer.

Who Needs to Have Critical Illness Insurance?

Is critical illness insurance for you?

Given that people in the United States are living longer and the average age a critical illness occurs is 43 years, there may be many years in your lifetime where it would make sense to be covered with critical illness insurance. Other items may factor into the decision to carry this insurance. These include: 

- Your health history and the health history of your family of origin 
- Your job and/or living environment, and whether these may increase your chances of becoming critically ill 
- Your age 
- Your assets - can you currently afford health care or your living expenses should you become critically ill? Do you need the insurance to cover these costs? In addition, can you afford the premiums for critical illness insurance?

What Are the Advantages of Critical Illness Insurance?

If you qualify for the critical illness benefit, the flexibility of this insurance is probably its chief advantage. The money can be immediately used for any obligation – medical or otherwise – relieving additional stress during an already trying time.

Given the exponentially increasing costs of health care in the United States, these policies could provide some assurance that an afflicted person might remain financially solvent should a devastating illness occur.

What Are the Disadvantages of Critical Illness Insurance?

Because this insurance is exclusive in the conditions it covers, it may make more sense for an individual to purchase a good, comprehensive health insurance policy. A health insurance policy might offer more flexibility in its coverage.

Is Payment Guaranteed under Critical Illness Insurance?

Every situation is different, and it is possible, depending upon the terms of your policy, that benefits could be denied in certain situations. These might include: 

- You make it through the survival period, but the illness has completely subsided 
- You make it through the survival period, but the illness has changed, or only partially subsided  
- You do not survive 
- Other exceptions defined by the policy.

Always read your policy carefully and understand the policy completely before purchasing insurance.

Additional Resources 

- Life and Critical Illness blog: http://www.life-critical-illnpess.co.uk/ 
- Insurance.com directs you to over 200 insurance companies: http://www.insure.com/articles/healthinsurance/critical-illness.html   

- The National Underwriter covers info about critical illness coverage and forecasts its growth in the U.S.: http://www.lifeandhealthinsurancenews.com/Exclusives/2009/01/Pages/The-Forecast-For.aspx