Critical Illness Insurance –
Key Coverage for Healthcare Overhaul

What does the new healthcare reform mean for life insurance producers? It means a timely opportunity to meet a need and fill a gap. Skeptical? Consider this: Regardless of politics, most experts agree that the reform won't do anything to lower insurance premiums in the short term. In fact, several sources predict health insurance prices will continue to skyrocket. According to healthcare expert Henry J. Aaron, "Insurance premiums will roughly double over the next six to 10 years for people with group coverage through work, just as they would have without the legislation. And for nearly 37 million people in the individual insurance market, the new minimum package of benefits means they can expect to pay 10 to 13 percent more than they would have if the bill hadn't passed."

Because expenses will continue to rise, employers and consumers will choose high deductibles or coinsurance to offset rising health insurance premiums. Or, they'll choose policies that offer limited coverage for traditional treatments. As a result, more individuals will be burdened by large medical bills not covered by traditional insurance policies, creating an urgent need for a lump sum of money to cover healthcare expenses.

Where will your clients get a lump sum of money? They will get the cash through their critical illness policies, assuming you've sold them. As you can see, NOW is the perfect time to market critical illness insurance. The best part about this opportunity is that coverage is fairly affordable. In fact, many clients can receive $25,000 of coverage for just $25 a month!

Critical illness insurance has been popular for some time in Canada and Europe, but it's only recently gained popularity in the U.S. as traditional health insurance leaves consumers with more and more coverage gaps. It's an important solution to have in your tool belt and a big differentiator too, since many producers don't offer this valuable coverage. Below you'll find everything you need to know to serve clients better and build your income by adding critical illness to your product suite.

What is critical illness insurance?

Critical illness insurance provides financial protection when a major illness occurs and a person is unable to work and earn an income. This medical insurance helps cover medical expenses that are typically not covered by other insurance policies. Paid in lump sums, critical illness insurance gives clients the freedom to use the money where it is needed most — from medical bills to the mortgage.

Critical illness insurance works by paying for expenses that result from a long-term recovery from a covered illness. It does not pay for each medical bill, but instead provides a payment that can be used toward any condition listed on the policy.

Who is critical illness insurance best suited for?

Critical illness is best suited for:

• Individuals with a history of chronic illness.
• Those with a history of chronic health problems in the family.
• People in high-risk jobs who do not qualify for disability insurance. However, those occupations – such as firefighters, long-haul truck drivers or police officers – may qualify for critical illness insurance.
• Anyone who is concerned about not having adequate income to absorb the critical illness costs not covered by traditional insurance.

What compelling statistic can you use when talking with prospects?

According the American Association of Critical Illness Insurance, the chances of being diagnosed with a critical illness before age 65 are:

• 25 percent for a male, 25, nonsmoker
• 49 percent for a male, 25, smoker
• 25 percent for a female, 25, nonsmoker
• 36 percent for a female, 25, smoker

What are the key selling features and benefits of critical illness insurance?

Coverage features vary by product, so make sure you're familiar with the product you're selling. Most critical illness policies include the following key coverage features:

• Paid expenses: Long-term recovery from an illness often includes many unexpected expenses. Critical illness insurance fills the gaps so a person is not overwhelmed by medical bills.
• Guaranteed renewable: As long as premiums are paid on time, the right to renew a critical illness insurance policy is guaranteed, which provides peace of mind to clients.
• Lump sum benefit: If diagnosed with one of the covered conditions, a lump sum benefit is paid out to the insured. This payment then can be used for any condition that is listed on his policy. What the insured does with the benefit is up to him. He could use the money to pay medical bills, to cover his mortgage or to pay utilities. With the lump sum payment, the insured could even pursue alternative care or hire a healthcare worker.
• Benefits paid directly to client: Critical illness insurance pays the insured directly, in addition to all other insurance coverages he may have, which gives the client control of how the funds will be used. In this way, critical illness insurance bridges the gap between a traditional health insurance policy and the actual expenses incurred.
• Flexible coverage options: In some cases, clients can choose to have a policy paid up in 20 years or have premiums returned after 15 years, creating the flexibility clients need and demand.
• Wide range of coverage: Although coverage differs from company to company, typical illnesses and diseases covered by critical illness insurance include: ALS and other motor neuron diseases, Alzheimer's disease, benign brain tumor, blindness, cancer, coma, coronary artery bypass surgery, deafness, heart attack, kidney failure, loss of limbs, major organ transplant, multiple sclerosis, occupational HIV, paralysis, Parkinson's disease, severe burns and stroke.

The bottom line? Now's the time! Offer critical illness insurance before the crisis.

Healthcare reform has opened the window to critical illness opportunity. With rising medical costs, people living longer and traditional health insurance plans leaving more consumers with gaps in coverage, critical illness insurance should be an essential element in every family's overall financial protection portfolio. Start offering critical illness insurance today and secure your clients' financial futures while you help your own.

The original version of this article was published in the June 2010 issue of Health Insurance Underwriter.