A critical illness policy, otherwise known as a “dread disease policy”, is a policy where the insurance carrier will pay a lump sum cash benefit if the if the policyholder is diagnosed with one of the covered maladies.
Typically, the lump sum benefit is paid to the insured once the diagnosis is verified by the insurance carrier through medical records of any attending physicians and/or facilities.
How will the critical illness policy work?
Each insurance carrier has different condition that will be included in the policy; some more than others. Selected Benefits is contracted with many critical illness companies ranging from a simplified underwriting policy with Humana that covers 10 illnesses to Assurity Health which covers up to 21 named illnesses and diseases.
These illness generally include heart attack, most all forms of cancer, stroke, terminal illnesses, HIV/AIDS, Parkinson’s, multiple sclerosis, blindness, paralysis, kidney failure, major organ transplant, etc.
The policies are available in face amounts of $5,000 on the low end up to $250,000 on the high end and are priced accordingly. Typically, the lower face amounts of $5-50,000 policies are issued through simplified underwriting meaning that the insurance carrier will ask a short series of questions before issuing the policy. The larger face amount policies typically require full medical underwriting much the same as a large face amount life insurance policy. This would include a blood and paramedical exam plus an extensive application.
The main benefit of a critical illness policy in Texas is that the monies received can be used to pay for anything the insured wants. It is not specifically earmarked for medical expenses. For example, he/she can help pay the costs of treatment to include deductibles and out of pocket on the medical insurance policy. One can also use the funds to pay for lifestyle change, replacement of lost income due to the illness or even travel to different medical facilities.
Texas critical illness coverage can be purchased as an individual, family or even on a companywide basis for an employer as it’s typically linked to a small group medical insurance policy and offered to employees. Many of our Texas employer group insurance clients use this product in addition to group life insurance and group accident, dental and vision to attract new employees.