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Texas Critical Illness Insurance

Critical illness insurance, also known as catastrophic illness insurance, is a supplemental policy that offers a lump-sum of money when the insured is diagnosed with 'critical illness' - often a disability or a long-term and debilitating illness. Texans suffering from such serious conditions as cancer, heart attack, stroke, etc., usually receive state-benefits and/or sick-pays from employers. However, these benefits may not be sufficient for your needs. Having critical illness insurance provides a large reserve-fund for paying off huge medical expenses often associated with covered illnesses. One major point to note is that policyholders must live for a certain number of days after being diagnosed with the covered illness to be eligible for the predefined benefit. Insurers call this the survival period. Once received, the lump-sum payout must not be spent on medical expenses alone. You can even decide to use part of the funds to offset your mortgage.

It is not advised to jump right in and purchase a critical illness insurance without understanding how it works, the pros and cons, and whether it is right for you.

What is Considered Critical Illness Insurance?

Health insurance plans designed to pay a lump-sum cash benefit to policyholders suffering from serious medical conditions are considered critical illness insurance. Most traditional health insurance policies do not cover many life-threatening ailments or provide minimal coverage for these illnesses. Consequently, seeking quality healthcare for these conditions can be financially draining as the costs of surgery, medicals, in-hospital stay, check-ups, etc. continue to pile up. As such, critical illness insurance becomes beneficial for such critical medical events. This insurance policy provides an agreed lump sum for the policyholder to offset medical and non-medical expenses.

What is the Purpose of Critical Illness Insurance?

Critical illness insurance is a form of health insurance that provides a lump-sum payment should you become seriously ill. The purpose of critical illness insurance policy is to make expensive but life-saving healthcare available to Texans at an affordable cost.

What is Critical Illness Insurance for?

Critical illness insurance is a health insurance plan designed to provide added protection for policyholders. It helps the insured make payments on the treatments of life-threatening health conditions that are often too expensive. Critical illness insurance is usually purchased as a supplement to health and/or disability income insurance.

What are the Types of Critical Illness Insurance?

In general, Texans can get critical illness insurance in one of two ways:

  1. Individual critical illness insurance: This refers to the critical illness insurance policies Texans obtain on their own - individually. Individual critical illness insurance policies are usually more expensive than group policies because the person purchasing the coverage is liable for all premium payments.
  2. Group critical illness insurance: Group critical illness insurance is open to a group of people belonging to the same group or association, usually an employer. Indeed, many employers offer group critical illness insurance to employees as a way of attracting the best talents. Members can benefit from various bonuses when they purchase critical illness insurance as a group. The group discount on premiums that most insurers offer to group members is one of these additional perks. This discount makes group critical illness insurance more affordable than individual critical illness insurance policies.

Do You Need Critical Illness Insurance?

You need critical insurance to avoid making expensive out-of-pocket payments when you receive healthcare for certain serious conditions. Critical illness insurance pays out a lump sum when policyholders get diagnosed for any of the covered illnesses. You, as the policyholder, determine the conditions your critical illness insurance will cover. Additionally, you also decide the value of the lump sum you will get as benefits. Another advantage to buying critical illness insurance is that you have complete discretion over how you spend the lump sum benefit. Many policyholders use the funds to cover expensive healthcare, others use such funds to pay off mortgages, or fund lifestyle changes. Texas does not make obtaining critical illness insurance mandatory so you must decide to obtain it yourself if you want to enjoy these benefits.

Why Do You Need Critical Illness Insurance?

There is a need for critical illness insurance as it helps policyholders cover medical expenses that are usually too expensive. With the average health insurance not providing coverage for major health conditions, it becomes necessary to obtain additional coverage. Critical illness insurance is a supplemental insurance policy that covers those excluded situations. Insurers make lump-sum payments which policyholders can use to pay for medical expenses and sort other associated bills, as long as the covered illness is included in the purchased plan.

Critical illness insurance is not only necessary for covering severe health conditions. It may also benefit individuals whose health insurance plan requires paying high deductibles. Some Texas health insurance deductibles may be as high as $15,000.

How Much Critical Illness Insurance Do You Need?

The extent of critical illness insurance coverage obtained usually depends on the needs of the individual obtaining the policy. Generally, many insurers' critical illness insurance policies cover a wide range of serious illnesses, some extending coverage to as much as over 20 conditions. However, it is not compulsory for every aspiring policyholder to buy such all-encompassing critical illness insurance policies. You can obtain policies that exclusively cover the conditions to which you are most exposed. Every aspiring policyholder must note that the number of ailments covered has a direct impact on the cost of critical illness insurance. Individuals whose coverage extends to a wider range of illnesses pay more costly premiums than those whose coverage is limited.

If you want to know the cost of obtaining critical illness insurance, speak to Texas-licensed insurance agents. Professional agents know about insurance products and advise prospective policyholders on the product that best suits their individual needs.

What Critical Illness Insurance Coverage Do You Need?

The critical illness insurance coverage you need depends on your present realities and expected needs. Prospective policyholders must consider age, existing health insurance plan, family health history, and pre-existing underlying conditions before purchasing critical illness insurance. For example, if your family has a history of hereditary critical diseases such as cancer, you may need a policy covering only cancer. However, you may also decide to expand your coverage to include other critical illnesses for better health security and protection. The extent of coverage affects the lump-sum payment and the monthly premium. For example, the premium a 40-year-old male Texan subscribed to cancer-only critical illness insurance pays can be about $25. Expanding the plan to cover more conditions can increase that monthly premium to $50 or more. Speaking to a Texas-licensed insurance agent will help you decide the exact coverage you need.

Is Critical Illness Insurance Required by Law?

No, critical illness insurance is not required by law in Texas. Critical illness insurance is an elective type of coverage.

How Does Critical Illness Insurance Work?

Interested individuals obtain this coverage to complement existing health insurance coverages. The nature of the covered conditions, as well as the number of illnesses this policy covers, depends largely on the insured. After deciding on a suitable critical illness insurance policy, the insured begins to pay the agreed premium monthly or annually. If the insured suffers any condition the approved policy covers, that individual submits a claim to the insurer and receives the agreed lump sum. Any claim submitted for conditions not included in the agreed coverage gets rejected. The major benefit of obtaining critical illness insurance coverage is that it allows policyholders to finance expensive medical healthcare.

What Does Critical Illness Insurance Cover?

Critical illness insurance covers the medical expenses spent on managing and treating serious illnesses. The exact terms contained in the policy depend on the agreement between the insured and the insurer. Some policies cover a range of qualifying conditions, while others offer coverage for only a single illness.

What is Critical Illness Insurance Good for?

Critical illness insurance is suitable for financing major covered medical procedures that an individual's health insurance policy may not adequately cover on its own. Managing certain life-threatening health conditions is expensive, and not many Americans can afford to make such out-of-pocket payments.

Prospective policyholders can speak to Texas-licensed insurance agents to learn about the many benefits of critical illness insurance.

What Does Critical Illness Insurance Typically Include?

Critical illness insurance usually covers severe conditions, including:

  • Cancer
  • Heart Attack
  • Stroke
  • Kidney failure
  • Major organ transplant
  • Paralysis
  • Blindness
  • Parkinson's diseases
  • Terminal Illnesses
  • Multiple Sclerosis

Prospective policyholders can obtain this policy to cover only a single illness or a set of various conditions. Before opting for critical illness insurance, discuss it with Texas-licensed insurance agents who can help determine the coverage based on your needs.

Who is Covered by Critical Illness Insurance?

Individual critical illness insurance policies usually cover the policyholder. However, some insurers extend the coverage to the policyholders' spouses and unmarried children, who are below a certain age. The value of premiums paid may increase as a result of this extension. Alternatively, a group critical illness insurance policy covers every member of that group or association. Any member diagnosed with any of the covered conditions is eligible to receive the predetermined benefits.

What Types of Items Does Critical Illness Insurance Cover?

Critical illness insurance covers life-threatening medical conditions that can be too expensive to manage without any insurance. The top 5 most common conditions critical illness insurance covers are:

  • Heart attack
  • Cancer
  • Kidney failure
  • Stroke
  • Major human organ transplant

Many Texans may not be able to afford medical treatment for these serious disorders, as well as the necessary lifestyle adjustments, without critical illness insurance. For example, treatment for cancer, which according to a CDC report is the second most common cause of death in the country, can be financially draining. It involves prolonged hospitalization, chemotherapy sessions, blood transfusion, and sometimes, surgery. When discharged from the hospital, recovering cancer patients subsequently require professional nursing care and a lot of prescription drugs. All these cost money. Critical illness insurance provides a predetermined lump sum that policyholders can use to fund all the medical and non-medical expenses required.

What is Not Covered by Critical Illness Insurance?

Critical illness insurance policies do not cover the essential health conditions which the ACA-compliant health insurance adequately covers. As the name implies, Critical Illness insurance only covers policyholders diagnosed with severe diseases agreed to in the policy.

What Does Critical Illness Insurance Typically Exclude?

Asides from everyday illnesses, which the ACA insurance already covers, critical illness insurance does not also provide coverage for these individuals:

  • Persons involved in war situations or active in the military
  • Persons suffering from self-inflicted injuries or injuries caused by attempted suicides
  • Cosmetic surgeries or other voluntary and non-essential medical procedures
  • Many insurers also exclude individuals found known for drug and alcohol abuse.

Discuss the differences between the critical illness plan coverages with a Texas-licensed insurance professional.

What is an Example of Critical Illness Insurance?

An individual obtains critical illness insurance coverage and starts paying the prescribed monthly premiums. The insured continues making the monthly payments until (if) they suffer a critical illness covered by the plan. Once diagnosed with a covered illness, the insured receives a lump-sum payment in the amount according to the purchased policy. The lump sum received can be used to pay for medical and non-medical expenses.

Employers also may offer group critical illness insurance to employees. Employers frequently split the cost of such coverage with their employees. Some employers may even cover it at 100%, providing an added level of financial security for the workforce.

What is the Most Common Use of Critical Illness Insurance?

The most common use of critical illness insurance is to get fast access to a lump-sum cash payment, to cover the cost of medical expenses associated with a covered critical illness, such as cancer, stroke, or having an organ transplanted.

Per Census Bureau, about 19% of American households carry medical debt and are unable to afford a sudden medical bill of $2,000 or more.

What is the Difference Between Critical Illness Insurance and Disability Insurance?

Critical illness insurance and disability insurance are supplemental types of insurance, usually purchased as an extra to the existing major health insurance plan. They are not mandatory and only provide added coverage for health issues that the ACA and Short-Term plans may not adequately cover. However, there are slight differences between the two. Some of the differences between the two supplemental health insurance policies include:

  • Critical illness insurance covers only individuals diagnosed with a pre-determined set of life-threatening conditions. On its part, disability insurance covers a broader range of diseases than critical illness insurance. It covers the wages and income lost while recuperating from injuries or illness.
  • Another difference is in how the benefit gets paid out when the claim is filed. Critical illness insurance pays a lump sum which the insured uses to fund medical and non-medical expenses. However, disability insurance pays the insured benefits monthly for an agreed period or till the insured reaches an agreed age, usually 65 years.

Do I Need Critical Illness Insurance if I Have Disability Insurance?

Yes, there is still a need for critical illness insurance even if an individual already maintains disability insurance. Both policies are not substitutes but are rather complementary. Disability insurance benefits are usually not enough to manage critical illnesses. The benefits it provides are only a fraction of the insured's regular monthly income. Critical illness insurance provides lump-sum payments that can help fill the gap in the family cash-flow, during such situations.

Similarly, disability insurance complements critical illness insurance. It provides the insured with a steady source of monthly income that can outlast the critical insurance benefit. It is advisable to discuss your specific needs with a trusted Texas-licensed insurance agent who can guide you through the process and advise on the best coverages to fit your specific needs.

Do I Need Critical Illness Insurance if I Have ACA Insurance?

Yes, if you have ACA insurance, you can benefit from critical illness insurance.

ACA-compliant coverage comes in various levels of coverage, with deductibles ranging from $0 to over $7,000, in addition to coinsurance and copay. All these costs must be paid until the plans' Maximum out-of-pocket (MOOP) amount is met.

Depending on the plan, in 2022, ACA MOOP was as high as $8,700 for individual plans and $17,400 for families. In case of an illness covered by the plan, critical illness insurance provides immediate funds to cover the ACA MOOP and any other associated expenses.

Reach out to a Texas-licensed insurance agent who can help you decide if critical illness insurance is a useful supplemental coverage for your medical needs.

Is There a Waiting Period for Critical Illness Insurance?

Most critical illness insurers available in Texas usually require a waiting period of 30-90 days, after which the coverage begins. Make sure to plan your coverage accordingly. Discuss your options with a professional.

What Happens if You Don't Use Critical Illness Insurance?

If you did not use the benefits of the critical illness insurance, it means that you did not suffer the illness you were worried about. It should be a relief.

Meanwhile, all the payments you have made into the plan over the life of the policy are kept by the insurer. The insurer uses this money to reinvest and to pay out claims of other individuals covered by this type of plan.

If you are considering dropping the coverage, make sure to consult with your medical and insurance professional advisors prior to doing so.

Who Can Get Critical Illness Insurance?

Any willing adult can obtain critical illness insurance in Texas. Many insurers sell this product to adults in their 20s and 30s. However, the best age to obtain this type of policy is usually 40 to 55 years. This is because most adults develop critical health issues in their 60s. They can secure policies that pay out large lump sums of cash while keeping their premiums low by obtaining this policy early enough.

Another factor that can stop an individual from obtaining critical illness insurance is the presence of a pre-existing condition. Pre-existing conditions are illnesses the prospective insured currently has or suffered in the past. Insurers usually do not provide coverage for individuals with pre-existing conditions. If the insurer does not reject individuals with such conditions, the premium placed on the policy offered to the insured is much higher. Alternatively, insurers can offer such prospective clients critical illness insurance that does not cover any ailment related to the pre-existing condition present in such individuals.

If you desire to obtain this policy, seek out a credible Texas-licensed insurance agent and have a discussion about your medical needs. The agent can use your unique information to advise on the best critical illness insurance plan that suits your needs.

What are the Benefits of Critical Illness Insurance?

Critical illness insurance provides policyholders with many benefits, including providing funds for expensive healthcare. However, as with all supplemental insurance plans, any potential subscriber must consider the advantages and accompanying disadvantages before obtaining this policy. Such persons must ensure the policy suits their particular individual needs and lifestyles.

Why is Critical Illness Insurance Good?

Some of the many benefits of obtaining critical illness insurance include:

  • Critical illness insurance ensures policyholders have access to quality and possibly expensive healthcare at relatively low rates.
  • The lump-sum that critical illness insurance pays as benefits is tax-free.
  • There is total freedom on how you spend the benefits. You can use it for both medical and non-medical expenses.
  • The critical illness insurance policy complements any other existing medical insurance the insured already obtained.

Why is Critical Illness Insurance Bad?

Some possible disadvantages of critical illness insurance are:

  • It has limited coverage. It only covers a predetermined set of ailments as agreed in the policy.
  • In most situations, diagnosis of any qualifying condition does not automatically translate to the payment of benefits. Many insurers only pay after the insured survives for some days, usually 30 days after diagnosis. This period is called the survival period.
  • Any critical illness insurance can be quite complex, with many lists of exemptions and terms of payment of benefits.

Interested Texans can seek the advice of credible Texas-licensed insurance agents before obtaining this policy. Insurance agents know more about insurance plans and can help pick out the most suitable insurance plan for your specific needs.

Is it Worth Getting Critical Illness Insurance?

Only the prospective policyholder can decide the worth of any critical illness insurance plan. While its benefits are very attractive, some persons may have conditions that make them unqualified for this policy. Some other individuals can only obtain this policy at a high premium because of certain factors, such as advanced age and the presence of pre-existing conditions. These persons may consider it unnecessary to get critical illness insurance.

What Happens if You Don't Have Critical Illness Insurance?

Without critical illness insurance, you have to pay for the treatment of certain life-threatening conditions from your pocket. These medical procedures are usually expensive and can lead to many individuals and families going bankrupt. For example, cancer treatment can be as high as $200,000, depending on the type and stage of cancer. Kidney transplant procedures are similarly expensive. Such surgeries in Texas can cost over $400,000, while the estimate for a typical heart transplant procedure can be over $1.4 million.

Why is Critical Illness Insurance Important?

The importance of critical illness insurance cannot be overstated. It provides additional coverage for ailments which the typical Texas health insurance (ACA-compliant and Short-Term) excludes or only offers minimal coverage. These exempted conditions are usually life-threatening, and treatments are equally expensive. It is vital for individuals with a history of some diseases, such as cancer, in their families.

Critical illness insurance provides coverage for such persons who may have that hereditary illness themselves at some point. The lump-sum it pays as a benefit helps to provide some form of financial security as the policyholder battles recovery. Without this benefit, paying for the treatment from out-of-pocket can lead to debts and bankruptcies. Policyholders also have total freedom to decide how to disburse the tax-free funds received as benefits. Some individuals use it to pay off mortgages, car leases, and other non-medical expenses.

What Happens When Your Critical Illness Insurance Lapses?

Insurers can annul existing critical illness insurance if the insured fails to make the monthly premium payment for over 30 days. If the insured develops a qualifying condition before those 30 days are over, the insurer pays the agreed benefit. However, the missed premium gets deducted from the payout, prior to the balance going to the insured.

Consult a Texas-licensed insurance agent to receive professional advice about critical illness insurance needs.