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Cancer insurance pros & cons: What to know before you buy

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Treating cancer can be one of the most expensive medical costs. A cancer patient is two and a half times more likely to file for bankruptcy than a healthy person.

In the United States, cancer patients spent $150.8 billion on care in 2018. Like other areas of health care, cancer care is expected to rise in cost in the future as demand increases and new, more expensive treatments are introduced.

Many cancer drugs cost six figures a year. In fact, even with health insurance, some patients may face out-of-pocket costs of nearly $12,000 a year for one drug. Treating the disease may also require expenses on doctor appointments, chemotherapy treatments, and lost income from missing work.

One way to help pay for cancer treatments is to purchase a cancer insurance policy.

What is cancer insurance?

Cancer insurance is a supplemental insurance policy that offers benefits for expenses related to a cancer diagnosis. It is designed to fill in the gaps left by the limitations in your primary health insurance plan.

Chances of getting cancer

How likely are you to get cancer, anyway?

According to the National Cancer Institute, about 39.5 percent of people will be diagnosed with cancer at some point during their lifetimes. That means two out of five people get cancer.

If you’re arguing for the benefit of cancer insurance, you can point to the fact that the average person has a 40 percent chance of getting the disease.

At the same time, you can argue against cancer insurance by pointing out that you have a 60 percent chance of not getting cancer.

Cost of cancer insurance increases with age

The cost of cancer insurance varies based on a number of variables, including the insurance company issuing the policy.

Premium amounts will get more expensive as you age. That means if you want to save money on your monthly premium, you have to buy at a young age. But that also means you could be paying premiums for decades without collecting benefits. Of course, the longer you wait to sign up for coverage, the more at risk you are of getting cancer before you’re covered.

Experts say the average rates for cancer insurance are $20 a month for people in their 30s, $40 for those in their 40s, and $60 for those in their 50s. People in their 60s will pay an average of $90 a month.

Lump-sum cancer insurance policies are available

One of the advantages of cancer insurance is that you can find coverage that pays a lump sum benefit upon a cancer diagnosis that meets policy criteria. With this type of policy, you can use the benefit for any purpose, including treatment expenses or lost income. Policies offered by Breeze start at $10,000 in coverage and can go as high as $100,000 in coverage.

The other option is a traditional policy that pays benefits based on your medical expenses related to cancer. This type of policy is less flexible. Traditional plans either pay a percentage of treatment costs up to a maximum limit, or a specified fixed amount for each benefit spelled out in the policy.

It may limit benefits for cancer-related expenses

One of the downsides is that many cancer insurance policies do not provide benefits for the diagnosis of non-melanoma skin cancers, which comprise the majority of skin cancer diagnoses.

Some cancer insurance plans also limit benefits to costs related directly to cancer. A subsequent illness that was directly or indirectly caused or complicated by cancer, such as a bout of pneumonia, may not be covered.

Cancer plans may also stipulate that you cannot receive double benefits from both a cancer policy and your primary health insurance plan. In addition, your primary health insurance plan may not pay for duplicate benefits offered by a cancer insurance plan due to a coordination of benefits clause. Coordination of benefits is a process that decides which insurance pays first when you have multiple policies.

In addition, some cancer insurance plans may not pay benefits related to the detection of pre-malignant symptoms or other conditions that show the potential for malignancy.

Your benefits may also be limited based on when you file a claim. For example, one policy only pays 10 percent if you are diagnosed with cancer within 30 to 90 days after the policy’s effective date. Another policy reduces benefits by half once you turn 70, while another does so at age 65.

Pros & cons of cancer insurance alternatives

There are alternatives to cancer insurance that you can use for other illnesses if you never get cancer.

One example is critical illness insurance (CII). This type of insurance pays a lump sum benefit if you are diagnosed with a covered illness. In addition to cancer, CII policies often cover heart attacks, strokes, organ damage, and other acute conditions. Critical illness insurance can pay for costs not covered by health insurance, such as deductibles and out-of-pocket costs. You can also use the funds for travel expenses and your regular bills.

Another option is a health savings account (HSA). An HSA is a tax-preferred savings account that enables users to set aside tax-free dollars to pay for health expenses, including regular medical care, dental and vision expenses. HSA funds would also be useful to spend on cancer treatments.

These alternative sources of cancer treatment financing also have limitations. For example, with CII insurance the severity of your condition will determine whether you receive a benefit. Policies pay partial benefits for less serious conditions. And you may not receive benefits at all if the condition is easily treated, such as a cancer diagnosis that was detected early.

A limitation of HSAs is that you can only contribute to one if you are covered by a high-deductible health insurance plan.

The main advantage of cancer insurance is that having an extra $10,000, $50,000 or $150,000 to cover the cost of treating the disease can minimize the financial stress of the diseases. If you are somebody with a family history of cancer or you have other high-risk attributes, then this supplemental coverage may be worth the cost.

Jack Wolstenholm is the head of content at Breeze.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published April 26, 2021
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