Critical Illness Insurance Helps Ease Cancer’s Financial Pain

The good news is the likelihood of surviving a cancer diagnosis has increased. The bad news is the cost of treating cancer has also increased…and so have deductibles and copayments.

Currently, an estimated 11 million Americans are living with cancer. Although your chances of surviving cancer are better now than ever, how will your budget fare? No matter how good your health insurance is, it won’t cover all costs related to your treatment and recuperation. Copayments, deductibles, transportation costs, lost work time, additional household help—these are just a few costs health insurance won’t cover. Cancer or critical illness insurance can help an insured pay these expenses and more.

Consider the cost of cancer drugs. According to a recent article by Dr. Hagip Kantarjian, all new cancer drugs approved in 2014 cost more than $120,000 a year. He also noted that, “Before 2000, the cost of a cancer drug was $52,000 for each additional year lived; by 2013 it increased to $207,000.” It’s no wonder that a cancer diagnosis is one of the leading causes of personal bankruptcy in the U.S.

The average critical illness policy has a face amount of about $20,000, but face amounts range from $5,000 to $100,000. The face amount indicates the maximum the policy will pay for a covered illness or policy period. Premiums cost about $300 to $500 annually, depending on the health, gender, age and location of the insured. Higher-end policies covering a dozen or more conditions generally pay benefits of more than $100,000 and cost about $1,500 to $2,000 a year.

Critical illness policies fall into two types, lump sum payment and reimbursement. Under lump sum payment policies, the beneficiary receives a lump sum for a covered diagnosis according to a policy schedule. Reimbursement policies pay on a per-event basis. These policies pay set per diem rates for hospitalization and recuperation time, often covering items not covered by catastrophic health plans. For instance, some policies cover transportation and lodging for family members who transport a patient to see a specialist.

If you offer critical illness insurance as a voluntary benefit, the employee is responsible for premiums. However, most policies qualify under Section 125 plans, so workers using payroll deductions can allocate pre-tax dollars to pay premiums. Critical illness policies are generally portable, and benefits are not reduced after the insured reaches a certain age. In addition, equal benefit amounts are available for each family member when the employee buys family coverage.

Some insurers offer a “return of premium” feature. If the insured dies of something that’s not covered by the policy— say, a car accident or a very rare disease—the provider will give back all of the premiums, minus any benefits already paid.

For employees who lack the savings to cope with a catastrophic illness, critical illness coverage can make a significant difference. Critical illness insurance might hold special appeal for employees who are caring for children or aging parents. By lessening the financial blow of a serious illness, the employee can focus on recovery, rather than the added stress of staggering medical expenses.