How Critical Illness Insurance Works:
In evaluating a critical illness insurance policy, you need answers to these questions:
What Is Covered?
Critical illness insurance pays benefits upon the diagnosis of specified illnesses. A
basic policy should cover at least heart attack, stroke and life-threatening cancer. A
more comprehensive policy should also include other serious conditions, such as
renal failure, multiple sclerosis, coronary artery disease, advanced Alzheimer's
Disease and major organ transplant.
What Is the Benefit Amount?
The benefit amount is selected at the time the policy is purchased and, generally
speaking, can range from $10,000 to $100,000 or more. The benefit amount is paid
in a lump sum upon diagnosis of a critical illness covered by the policy. Since the
premium paid increases as the benefit amount increases, it is important to evaluate
your other sources of funds available in the event of a serious illness in order to
more accurately determine the critical illness insurance benefit amount that is right
for you.
When Is the Benefit Paid?
The critical illness insurance benefit is paid to you in a lump sum upon diagnosis of a
critical illness covered by the policy. Some critical illness insurance policies pay a
partial benefit, such as 25% of the maximum benefit, on the occurrence of certain
specified treatments, such as coronary angioplasty or coronary artery bypass
surgery. The policy usually terminates upon payment of 100% of the benefit.
Does the Policy Have an Elimination or Qualification Period?
Some policies require that for benefits to be payable, the policy must be in effect for
a stated period of time, such as 90 days, before diagnosis of a covered critical illness
is made.
Critical Illness Insurance Checklist:
In purchasing critical illness insurance, it is important to select coverage that
matches your needs and preferences. As you evaluate various policy features and
benefits, however, keep in mind that the choices you make can affect the premiums
you pay and the benefits you are entitled to receive.
Covered Illnesses |
What serious illnesses are covered by the policy? |
Benefit Amount | What is the lump sum amount payable upon diagnosis
of a covered critical illness? Is the benefit amount
payable in a single lump sum, or in specified
percentages or amounts? If the benefit is payable in
specified percentages or amounts, does the premium
decrease accordingly? |
Elimination Period |
Is the benefit payable immediately after diagnosis of a
covered critical illness? If not, how long must the policy
be in effect before benefits become available? |
Guaranteed Renewable |
Can you renew the coverage for life, so long as you pay
the premiums when due? |
Premium Increases | Under what circumstances can the insurance company
increase the premiums? |
Death Benefit | Does the policy provide any kind of death benefit if you die without receiving any benefits? |
Optional Coverages | Are there any optional coverages available, such as inflation protection or an accidental death benefit?
Since optional coverages generally require payment of
an additional premium, carefully evaluate the value of
any optional coverages to you and your personal
situation. |
VSA 2A3.24, 2A3.25 ed. 01-08
VSA, LP The information, general principles and conclusions presented in
this report are subject to local, state and federal laws and regulations,
court cases and any revisions of same. While every care has been taken in
the preparation of this report, neither VSA, L.P. nor The National Underwriter
Company is engaged in providing legal, accounting, financial or other professional
services. This report should not be used as a substitute for the professional
advice of an attorney, accountant, or other qualified professional.