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Is critical illness insurance worth it? Here's how to tell

Read Time
5 mins
If you are diagnosed with a critical illness, having access to this one-time lump sum cash benefit could prevent you from having to raid your life savings.

Nobody enjoys buying insurance. You’re spending money you’d rather use on other expenses on a service you hope you never use.

When you do have to use your insurance, you often find you’re still left with out-of-pocket expenses. For example:

Health insurance comes with deductibles. Once the deductible is met, many plans still only pay 60 to 80 percent of the cost for a procedure. That means if your treatment costs $10,000, you might still get a bill for $2,000 to $4,000 even with insurance.

Critical illness insurance can help you fill in the gaps from other coverage. This type of policy provides a one-time cash payment to help the insured avoid major financial loss. The money provided by the policy can pay for out-of-pocket health care costs related to the critical illness or cover household expenses while the insured recovers.

But is it actually worth it? Let's take a closer look.

Is critical illness insurance worth the peace of mind?

Critical illness insurance typically covers acute illness, including cancer, heart attack, and stroke. Some policies may also include coverage for organ transplants, kidney failure, or paralysis.

According to the American Heart Association, 720,000 Americans suffer a heart attack annually, and somebody has a stroke every 40 seconds. The American Cancer Society said there is a 33 percent chance for both men and women of developing cancer.

When you consider statistics like these, the answer to this question is oftentimes yes.

There are several types of insurance that help cover the cost of being sick, being disabled, and treating serious conditions. You may be thinking that having health insurance and/or disability insurance means you’re covered.

But here’s a scenario when even those insurance policies may leave you with a large out-of-pocket expense.

Imagine you have a serious heart condition. According to the American Heart Association, a heart attack hospitalization costs a median of $53,384 and strokes cost $31,218. Bypass surgery costs between $85,891 and $177,546.

If you have a critical illness that costs $90,000, your health insurance will likely cover 80 percent. That means the remaining 20 percent — $18,000 — will be your responsibility.

Not only that, but such an ailment will likely keep you out of work for a while. Disability insurance will cover most of your lost income. But if you have, say, a 60-day waiting period before benefits kick in, that’s two months of lost income.

Critical illness insurance can help you cover either of those shortfalls and provide valuable peace of mind.

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Is critical illness insurance worth the cost?

Critical illness insurance can help prevent you from having to raid your savings, deal with installment payments for several years, or worse — declare bankruptcy due to a serious illness.

Two-thirds of all bankruptcy filings are at least partially caused by medical issues. Those issues, according to a recent study by the American Journal of Public Health, are the high cost of care and missed time at work due to injury or illness.

That said, premiums for critical illness insurance will vary, based on a number of factors, including your age, gender, whether you use tobacco, the benefit amount you select, and how many conditions are covered.

If you’re young and don’t need a large benefit amount, the premium can be as low as $10 a month. But older applicants who want far more coverage can pay 10 times that amount or more.

If you purchase an underwritten plan, you will pay more in premium if you use tobacco and/or if you have a history of health issues. Premiums are also higher the older you are at application.

The American Association for Critical Illness Insurance (AACII) provided a quote for cancer-only policies that provide a $10,000 one-time benefit:

  • A 35-year-old male who doesn’t smoke can get coverage as low as $18 per year. But a female the same age who doesn’t use tobacco would pay at least $36 per year.
  • At age 50, the same coverage and benefit would cost a minimum of $89 annually for a male and $107 annually for a female.

The American Dental Association offers group critical illness coverage that provides up to a $50,000 benefit. Premium per $5,000 of coverage benefit range from $1.49 a month for a 20-year-old to $17.11 for a 69-year old. That means a $50,000 would require a monthly premium of $14.90 for the 20-year-old ($1.49 x 10) to $171.11 for the 69-year-old.

Ready to see your critical illness insurance quote?

Should I get critical illness insurance?

You should consider getting critical illness insurance as early as possible. Life can change for anybody. You may not be able to prevent the worst from happening. But you can minimize the financial impact by insuring your health, your income, and your life.

More and more employers offer group critical illness insurance as a way to protect employees from the high cost of certain illnesses. According to the Society for Human Resource Management, about 25 percent of employees include CII in their benefits packages.

In some group plans, employers cover some or all of the cost of the insurance. In others, the employees pay the full premium if they elect coverage, though they benefit from group price.

In most employer-sponsored group CII plans, the coverage is portable. This means you can continue coverage as an individual policy if you no longer work for the company by paying the full premium amount. This is a benefit since most employers do not offer group CII.

If group CII is not available to you, you can buy an individual policy from a number of insurance companies that offer health, disability, and/or life insurance. Several life insurance policies offer critical illness coverage as an optional rider.

One of the advantages of getting an individual policy is that you can shop for a policy that covers the number of illnesses you want to be covered. Some individual CII policies cover a handful of ailments. Others provide benefits for 30 or more conditions. Keep in mind that the more conditions it covers, the more your policy will cost.

To get started shopping, check your critical illness insurance rates online. You can even submit an application for coverage right there on the spot if you find a policy that works for you.


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.

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