Critical Illness Insurance in Colorado: How Does It Work?

It can be hard to choose the right type of supplemental insurance for you. There are many options out there when it comes to protecting you and your loved ones’ financial security. However, you need to understand what critical illness insurance is and how the different types of insurance work.

So What Is Critical Illness Insurance?

Critical illness insurance (sometimes called “critical care insurance”) compensates you with a lump sum payment if you get diagnosed with an illness that the insurance policy covers. This insurance can also be organized to offer a series of payments to account for ongoing treatments.

Critical Illness Insurance in Colorado: The Basics

Critical illness insurance can cover very few illnesses, or a whole range of conditions. There are always conditions you must fulfill before getting your cash payout, so you need to understand the possible policies before choosing one. With some policies, you can combine critical illness coverage with others such as disability, accident, or life insurance. If you want to cover as many insurance coverages as possible in one go, this could be the best option for you.

How Does It Work?

This insurance generally includes a list of illnesses that the policy will cover. For each illness, there are specific criteria to decide when you qualify for payment. For example, you might be diagnosed with cancer, but you will still need to meet the specific criteria of your policy. If not, the company may deny your claim. Make sure you review the payout conditions of any critical illness insurance policy you are interested in. This includes looking at how the policy defines each disease and if there is a waiting period involved.

Do You Need Critical Illness Insurance?

You can’t know for sure whether you’ll need insurance. With critical illness insurance, you need to consider the cost of the policy versus the costs you would pay yourself for a critical illness. Consider whether you are financially able to cover costs on your own. If the answer is no, then critical illness insurance could be a good investment.

Imagine that you’re paying $50 per month (i.e. $600 per year) for $5,000 of critical illness insurance. You could pay for three years with no illness but develop a critical illness in the 4th year which is covered by your policy. In that case, the $2,400 you spent over the four years is well worth it for the $5,000 policy payout.

On the other hand, if you never get critically ill, that money might be better placed in an HSA or a savings account. That way, you could cover the $5,000 yourself in less than ten years. You could even benefit from the tax advantages of an HSA.

Bigger policies cost more but also pay out more. A possible payout of $25,000 could be much more helpful than smaller policies, but you really need to consider how valuable critical illness insurance would be for you personally.

What Affects the Price of Critical Illness Insurance?

The amount of the lump sum cash payout you want

• Your general health
• Your age
• If you are a smoker
• If you buy the insurance as a stand-alone or as an endorsement of another policy you hold

What Are Your Critical Illness Insurance Options?

You have two options to think about:

• How much you want the cash payout to be if you develop a critical illness that is covered
• Which illnesses qualify

Critical illness insurance plans can be purchased for up to half a million dollars, but most purchased plans are around $5,000 to $25,000. Your policy may cover minimal critical illnesses or a wide amount with up to 30 or 36 conditions.

What Does the Lump Sum Cash Payment Cover?

Critical illness insurance pays cash straight to you, instead of paying doctors or hospitals for your medical procedures. This means you can pay for whatever you want with a critical illness insurance payout.

This could include:

• Paying your living expenses during your illness
• Helping to cover home care and rehabilitation costs
• Covering the deductible in your health insurance plan
• Avoiding medical debt

The Conclusion

Even with comprehensive insurance coverage, being diagnosed with a critical illness can lead to financial hardship. Ask your financial advisor before you buy critical illness insurance. If you become ill, can you cover a long recovery period while you can’t work? Can you keep up with your living costs? Above all, how can you prepare yourself for these unforeseen costs?

Frequently Asked Questions

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