What is Critical Illness Insurance - Why is it Needed?
August 14, 2012| By Steve Rowley
Region: North America
In our last Critical Illness blog entry we discussed how Critical Illness insurance was conceived by Dr. Marius Barnard back in 1983. This entry discusses what Critical Illness is and why it continues to be a much needed product.
The time has never been better to add Critical Illness insurance to your product portfolio. After more than a quarter century of taking root in other countries, Critical Illness insurance has finally taken hold in the United States, where insureds and insurers are beginning to understand its real value. Agent demand for the product is on the rise, and the insurable need is growing as other insurance products trim down or limit their product features in order to maintain affordability. Although most apparent in the medical insurance arena, the same types of “gaps” in coverage are becoming apparent in traditional products such as disability income, long term care insurance, and even life insurance.
The gaps in other forms of coverage are most evident when it comes to surviving a catastrophic event such as cancer, heart attack or stroke. Many of your clients will be forced to choose between life-saving care and affordability when facing such events. Even with high-quality medical plans, deductibles and co-pays are rising rapidly, and the out-of-network coverage is often cost prohibitive. Add a related disability to the situation, and the problem only worsens as the insured is now forced to make difficult care or treatment decisions on only 60%-65% of their pre-disability income.
The inclusion of Critical Illness insurance in your product offerings helps to fill these and other gaps in an insured’s insurance protection. Benefits can be added on a stand-alone basis, as an additional benefit pool, or even as an acceleration of benefits, as in the case of riders to mortgage life insurance policies. Critical Illness insurance provides the insured with an unrestricted lump sum benefit upon diagnosis of a covered condition or event such as cancer, heart attack, stroke, kidney failure and major organ transplant.
Beyond these core conditions, some companies include niche benefit eligibility triggers, such as loss of vision, paralysis or even severe burns, in addition to a number of partial benefits such as coronary artery bypass grafting or carcinoma in situ.
What makes Critical Illness attractive to consumers is that, unlike most other health products, it does not pay based on a percentage of income, as a reimbursement of actual expenses, or even based on a menu of scheduled benefits such as traditional cancer products. Instead, Critical Illness provides the insured with a lump sum benefit upon diagnosis of a covered event. It’s a simple “If-Then” formula. The insured is free to use that money in any way they feel appropriate. Simply put, it provides consumers with a far greater degree of choice and treatment options than they may otherwise have. And “choice” is what consumers are asking for today when it comes to their personal health care.
Continue to check back for more blog entries that will walk through the continuum of Critical Illness insurance issues.