What You Need to Know about Critical Illness Insurance

Written by Jessica Adkins

April 5, 2017

What You Need to Know about Critical Illness Insurance


Simply put, critical illness insurance can bridge the coverage gap like very few products in the supplemental world. This product can help protect retirement savings and also help with your small-business employer groups with continuity from one generation or partner to another. Critical illness insurance can also generate a surprisingly incremental stream of revenue for insurance agents.

Critical illness insurance is relatively affordable and has the potential to help cover medical costs not covered by traditional health plans. Critical illness protection plans provide a lump-sum payment for one or more covered medical conditions, subject to policy terms and specification, including limitations and exclusions.

Contracts and plans, of course, differ from carrier to carrier, but critical illness plans are designed to empower policyholders to choose the care and treatment preferred when undergoing medical situations. Some examples include a major organ transplant, diagnosis with a qualifying event such as a heart attack, invasive cancer, stroke, kidney failure, paralysis, severe burns, coma, and the loss of the sight, speech, or hearing. When you look at the statistics on these conditions, it is a provoking and compelling argument that more families need to fill these coverage gaps, in particular with the rising costs of deductibles.

The American Heart Association and the American Stroke Association have shared about 85.6 million Americans are living with some form of cardiovascular diseases or the after-effects of stroke. Baby-boomers and Medicare beneficiaries are most prone to strokes. However, research published has indicated the risk to younger generations has increased dramatically.

Compared to the statistics from 1995-1999, stroke rates in 2010-2014 for the studied population rose 147% in people ages 35-39 and double in people ages 40-44.

It is difficult for individuals under the age of 50 to realize that strokes do not occur in only the older population, and the outcome can be more debilitating than a heart attack. Additionally, a recent update from the National Cancer Institute shows the number of individuals living in American beyond a cancer diagnosis is expected to rise to nearly 19 million by 2024.

Many of the cancer survivors’ conditions may constitute critical illness as spelled out in multiple policies and the survivors will indefinitely need assistance with paying for the cost of care. Even having Original Medicare Part A & Part B, and adding a Medicare Supplement Insurance plan, or Medigap does not necessarily equate to affordable cancer care. New research has shown that depending on the type of supplemental plan, cancer patients may find themselves with significant out-of-pocket expenses. For beneficiaries insured by traditional fee-for-service Medicare but without supplemental insurance, mean annual OOP expenses were $8,115.

The lump-sump benefit may help with direct costs such as deductibles, co-pays, and out-of-network medical expenses. Critical illness insurance plans bridge the gap between the what the health insurance plan will pay and actual expenses incurred by the best specialists, physicians and hospitals, experimental drugs and therapies, and of course, travel, lodging, loss of income, etc.

With most policies, clients have the freedom to use the policy payout as needed and can be used to supplement income, cover transportation-related expenses, and even living expenses (i.e., mortgage payments, bills, debts, etc.) As a general rule, if insurance premiums are paid with after-tax dollars, then the benefits from the plan are received income-tax free, based on current federal income tax laws. It is important to remind your client to speak with a qualified tax expert about his or her particular situation, as all situations and tax rules/penalties vary.

When promoting critical illness insurance plans to small business owners, present the idea of the potential to bridge the gap in the business’ succession plans. A small business usually is the owner’s largest retirement asset and business succession plans are designed to protect the value of the firm from the catastrophic impacts of an untimely death of the proprietor.

Providing critical illness solutions to your clients can help keep their retirement and family savings intact, ensure small business continuity, and create additional revenue for insurance agents, having full-feature solutions top of mind is a no-brainer.

If you have remaining questions on selling critical illness insurance, plans available in your market, or how to get started offering these plans, contact a Regional Sales Director at Agent Pipeline by calling 800-962-4693 for more information.

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