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Is Critical Illness Insurance Really Worth The Cost?

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Insurance Quotes 2 Day Team

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

 5 minute read

What would happen if you were diagnosed with a serious medical condition? 

Would your health care insurance cover all of your expenses? 

Out-of-pocket medical costs are rising, so purchasing a policy that covers those expenses that might not be covered by your health insurance seems like the logical choice.

These policies are known as critical illness insurance and are now being provided by more business owners, along with disability, health, life, and other forms of insurances. 

In fact, Aflac reports that almost half of employers provide critical illness insurance, which is nearly double the amount five years ago.  

However, even though more and more companies are offering this form of insurance, consumers are still unclear as to why they should buy it which begs the question: is critical illness insurance worth it?

What is Critical Illness Insurance?

Launched in 1996, critical illness insurance was designed to absorb some of the major costs associated with serious illnesses.  It’s been estimated that approximately 1 million U.S. Americans have critical illness insurance coverage.

The policy provides a lump-sum payment for the insured when diagnosed with a stroke, heart attack, kidney failure, or when in the need of a major organ transplant. 

Benefits might also be paid out for paralysis and loss of vision.  Additionally, there are cancer-only policies available.

The lump-sum payment that’s distributed is available to cover costs related to deductibles, prescriptions, treatments, and co-payments, as well as travel costs, loss of work, and extra expenses related to out-of-network providers.  However, the benefit associated with critical illness plans might be limited, so be sure to understand the policy and what is covered before purchasing. 

Here are some key points to consider:

  • Excluded Conditions

It’s important to understand that depending on the policy, not every form of cancer will be covered.  For instance, non-invasive forms of breast or prostate cancers may not be covered under some policies.

  • Pre-existing Conditions

Before purchasing a critical illness insurance policy, check to see if your pre-existing condition will be covered or whether you’ll have to undergo a waiting period.  If you’ve had a stroke or heart attack in the past, there’s a chance that a recurrence might not be covered.

  • Waiting Periods

Most plans will not distribute benefits for 30 to 90 days once a policy is bound.

  • Age-related Benefit Reductions

Some critical illness insurance plans reduce the lump-sum payout once an insured turns 65 or 70 years of age.

  • Partial Payouts

Instead of excluding certain conditions as a whole, some policies allow for a partial payout for conditions, such as angioplasty, heart bypass surgery, and non-invasive cancers.

  • One-time & Repeat Payouts

Be sure to look into whether the policy will cover the second incidence of illness.  If you have a 2nd heart attack, will the policy payout in full or partially?

  • Unrestricted Vs. Specified Schedule of Benefits

Most critical illness insurance policies will pay a lump-sum payment for the insured to use as he or she wishes.  Cancer-only policies either do the same or restrict the payouts for hospitalizations, radiation, or chemotherapy.

As mentioned, different policies will provide coverage for different conditions and illnesses, and they are all bound by different terms so it’s important to understand these terms to clarify is critical illness insurance worth it.

The most commonly covered illnesses or conditions include:

  • strokes
  • heart attacks
  • cancers 
  • end-stage renal disease
  • major organ failure
  • Alzheimer’s
  • coronary artery bypass disease
  • severe burns
  • loss of vision
  • loss of hearing
  • benign brain tumors
  • coma
  • paralysis 

If you purchase a family plan, other conditions included might be type 1 diabetes, cerebral palsy, cystic fibrosis, muscular dystrophy, and complex congenital heart disease.

How do I get Critical Illness Insurance?

Typically, employees purchase critical illness insurance at a discounted group rate. 

Then, depending on the policy purchased, they will have access to coverage for one or more illnesses, as well as any out-of-pocket expenses incurred. 

Payments distributed after a diagnosis of a covered illness can be used for co-payments and deductibles, and non-medical expenses like household bills, childcare, and transportation.

For most, critical illness insurance policies appear to be an excellent way of managing rising health care costs. 

Sources today tell us that an employee pays more than $5,300 today toward their individual health care costs, which has risen from $3,600 nearly a decade ago. 

Additionally, the average yearly deductible for a single employee has risen from $1,000 to $1,500 over the last five years – that’s close to a 50%  increase!  This means that consumers will be paying more in the event of a critical or chronic illness.

Critical illness insurance is more appealing due to their relatively low premiums.  A single, 50-year old, non-smoking male can purchase a $50,000 cancer-only plan for around $70 a month with Humana One, and that’s their highest coverage limit offered.

That might not appear to be too cumbersome, especially for a diagnosis of cancer.  However, if the above-mentioned male is diagnosed with a different condition, the coverage may not apply.   It is pretty clear that critical illness insurance does not provide the same coverage as the traditional health care plans of the Affordable Care Act.

Should You Buy Critical Illness Insurance?

Critical Illness insurance plans do not cover pre-existing medical conditions, however, traditional health care plans do so is critical illness insurance worth it?

Even though the premiums for both traditional health care plans and critical illness insurance increase with your age, the premiums of critical illness insurance are higher than the traditional plans. 

It’s important to note that some critical illness insurance policies will either reduce or completely eliminate your benefits once you reach a specified age, making life a little more difficult just when you need this coverage the most.

Critical illness insurance does give the consumer a sense of comfort, which certainly shouldn’t be minimized. 

However, for many, critical illness insurance is just not worth the price. We are always asked on a regular basis: Do I need critical illness insurance?

If you have concerns about your insurance coverage, talk with a reputable insurance professional about your options and they will be happy to offer a critical illness insurance quote for you.

You’ll want to be aware and fully understand what benefits are available with your traditional health care plan should you suddenly face a serious illness.  If you are questioning your coverage, consider shopping around at open enrollment time for plans with more affordable out-of-pocket costs. 

While your premium might be higher, it might be worth it to not have to purchase a separate critical illness insurance policy. Finally, after reviewing this information about critical illness insurance, you should be able to confidently know the answer: critical illness insurance is it worth it?

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Frequently Asked Questions

Is there a waiting period for critical illness insurance?

Most companies do have a waiting period of 30 to 90 days before benefits will be paid for a critical illness.

What are the most common types of critical illnesses a company will pay for.

getting life insurance with heart disease

Although there are many forms of critical illness, the most common are…
1. stroke
2. heart attack
3. cancer (other than skin cancer)
4. end-stage renal disease
5. failure of a major organ

Will my company cover pre-existing conditions?

Your pre-existing coverage will depend on the insuranace company. Before purchasing a critical illness insurance policy, check to see if your pre-existing condition will be covered or whether you’ll have to undergo a waiting period.

Will my life insurance cover critical illness?

Yes, and in many cases there is no charge. Most life insurers today offer the “accelerated death benefit” which will pay out a large portion of the death benefit to the insured if diagnosed with a critical, terminal, or even chronic illness.

author avatar
Doug Mitchell, CLU Independant Advisor
Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent almost 30 years in the life insurance industry and has also held licenses to sell securities, long-term care insurance and home and auto insurance. Doug is a Top of the Table Million Dollar Round Table member (MDRT).  MDRT is a global, independent association of the world's leading life insurance advisors.  For two years, Doug served as President of the Auburn Opelika Association of Financial Advisors and has been a member of the Million Dollar Round Table. He obtained Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award. Later in his career with New York Life he was an Executive Council Member. Doug currently serves as President of Ogletree Financial, a managing general agency serving life insurance agents and clients in all parts of the United States. Today, Doug’s main focus is servicing 1000s of policyholders and growing the agency through the reach of

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