What is critical illness insurance?

Critical illness insurance is a type of policy that provides a lump-sum payment if you're diagnosed with a serious illness covered by your policy. It can help you financially when you need it most by covering medical expenses and other costs at a time in which health insurance is likely to fall short.

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How does critical illness insurance work?

Medical bills are one of the leading causes of financial hardship for American families, accounting for 66.5% of all bankruptcies in the U.S.1 With health insurance premiums rising, many are turning to other solutions to help with the potentially high costs that come with critical illnesses like cancer or heart disease.

Critical illness insurance is one way to better prepare for the possibility of overwhelming medical expenses. It is sometimes offered through your employer as supplemental health insurance that you must opt into and pay for. You can also get critical illness insurance as a stand-alone personal policy or as a rider on some life insurance policies. However, it’s important to note that critical illness insurance may cover only a limited set of illnesses, and what is or is not covered can vary among policies.


What does critical illness insurance cover?

Critical illness insurance is designed to provide a financial safety net for some of the highest-cost medical illnesses, like cancer or stroke. When you're diagnosed with one of these covered illnesses, the policy pays out a tax-free lump sum, allowing you to focus on your recovery rather than worrying about finances. Here are some examples of critical illnesses or surgical procedures that critical illness insurance usually covers2:

  • Stroke
  • Heart attack
  • Coronary bypass
  • Certain cancers
  • Organ transplants
  • End-stage renal failure

Keep in mind that there is no set standard for critical illness insurance, and competing policies, which have their own rules and triggers, will cover these illnesses differently. For that reason, it’s important to shop around and fully understand how any given policy will provide coverage under various circumstances.


How much does critical illness insurance cost?

The cost of critical illness insurance may compare favorably with health insurance premiums and deductibles. Coverage for a healthy adult usually ranges from $25 to $100 a month2. Your actual cost will vary based on several factors:

  • Age: Premiums tend to be lower when you're younger.
  • Health: Your current health status and family medical history can impact the cost.
  • Coverage amount: The more coverage you want, the higher the premium.
  • Lifestyle: Risk factors like smoking may lead to higher premiums.


Can I get critical illness insurance without life insurance?

Yes, you can sometimes get critical illness insurance as a supplemental policy through your employer, or you can purchase critical illness insurance as a stand-alone policy. However, if you have life insurance that offers a critical illness rider, combining life insurance and critical illness insurance could be a smart financial move, as it can provide more comprehensive coverage for a bundled cost.


Do I need critical illness insurance?

That depends. You may already have insurance that covers some of the costs for which critical illness insurance provides protection. Or, you may have enough savings set aside in case of a medical emergency. If you do not, critical illness insurance is one of many options that can help. A financial professional can help you go through your existing coverage and options to tailor a solution that meets the needs of you and your family.


Is critical illness insurance worth it?

Only you can answer that question. Ultimately, the decision to invest in critical illness insurance should align with your financial situation, current coverage, and risk tolerance. Here are a few benefits and drawbacks to keep in mind2:


  • Financial security: The lump-sum payment can help protect your family against a financial crisis, so you can focus on getting better instead of worrying about medical bills.
  • Flexible use: You have control over how you use the payout, whether for medical expenses, household needs, or maintaining your family’s lifestyle.



  • Limited coverage: Some critical illnesses may not be covered. Policies vary, so read the fine print.
  • Alternative options: You might already have disability insurance or have savings earmarked for emergencies.


How much critical illness insurance do I need?

Generally, a coverage amount that can replace at least six months of income is a good starting point. It ensures that you have enough to cover immediate expenses and maintain your lifestyle during recovery.


Alternatives and other ways to protect your savings as you age

While critical illness insurance can be valuable, it's essential to explore all of your options for safeguarding your financial future. The options outlined below may contain some overlap with critical illness insurance and can work separately or work with it to form comprehensive protection for your family in a variety of circumstances.


Health savings accounts

You may have access to a health savings account (HSA) through your employer or as a personal benefit. An HSA offers a tax-advantaged way to save for medical expenses. Contributions are tax deductible, and withdrawals for qualified medical expenses are tax free. HSAs can be used to pay for high deductibles, co-pays, and other medical expenses that health insurance doesn’t cover.


Individual disability insurance

Disability insurance provides income protection if you become disabled and can't work due to injury or illness. Compared with critical illness insurance, it covers a broader range of disabilities, not just specific illnesses. The coverage amount is also tied to your current earnings, often paying between 50% and 100% of your income for a set period of up to several years. There are two types: short-term and long-term disability insurance. Learn more about your options.


Long-term care insurance

As you age, there is a high likelihood that you will eventually need help with some daily activities. Long-term care insurance helps cover the costs that health insurance doesn’t, like in-home care, assisted living, and nursing homes. While not a direct replacement for critical illness insurance, it can be an important aspect of comprehensive financial planning, especially considering the rising bills associated with this type of care. Read the basics of long-term care.

Critical illness insurance FAQs

If you are worried about the high medical expenses associated with certain illnesses and do not have coverage from other sources, critical illness insurance is one way to help protect your family financially.

This will change depending on the policy, but critical illness insurance most generally covers stroke, heart attack, coronary bypass, organ transplants, certain cancers, and end-stage renal failure.

A rider is an “add-on” to existing insurance that you might have, like a whole life policy. If you have a policy that offers this option, adding critical illness coverage may be better than purchasing a separate policy.

Critical illness insurance covers common illnesses, like cancer, heart attack, or stroke. Accident insurance covers injuries resulting from accidents, like car crashes or falls.

Yes. Critical illness insurance typically comes with a waiting period, which varies among policies but often ranges from 15 to 30 days.


Get guidance on critical illness insurance and other options.

We can answer your questions and provide valuable insights to help ensure your financial stability.

1Medical Bankruptcy: Still Common Despite the Affordable Care Act,” David U. Himmelstein, MD, Robert M. Lawless, JD, Deborah Thorne, PhD, Pamela Foohey, JD, and Steffie Woolhandler, MD, MPH, National Library of Medicine, March 2019.

2Financial protection during your journey to recovery,” healthinsurance.org, 2024.