Understanding Critical Illness and Disability Plans – What Are the Different Types?
Simply put, a critical illness or disability plan is a type of health policy that provides financial protection against unexpected medical costs. In other words, they put money in your pocket when you experience covered losses – money to use however choose.
There are several different types of disability plans, including hospital indemnity, home health & recovery, critical illness policies such as cancer, heart attack & stroke, as well as short-term and long-term disability coverage if you are unable to work. All of these plans provide various levels of coverage, according to available options you choose from, and can help to offset out-of-pocket expenses due to a medical emergency. Let’s take a closer look at each one and how they can help protect you financially.
Hospital Indemnity
A hospital indemnity plan is designed to pay cash benefits directly to you if you’re admitted to a hospital. It covers all kinds of hospital stays and helps cover the cost of co-pays or deductibles that your medical insurance may not cover. The amount of coverage varies from plan to plan but it typically pays a fixed amount for each day in the hospital, up to a certain limit. It may also pay for other services related to your admission such as ambulance rides and diagnostic tests.
Home Health & Recovery Insurance
Home health & recovery insurance is designed to help cover the cost of home health care services such as nursing care and physical therapy after you leave the hospital following an accident or illness. It pays cash benefits directly to you so that you can use that money for any number of services such as skilled nursing visits or assistance with bathing or dressing yourself. This type of policy also helps pay for medical equipment rentals, home modifications, and other out-of-pocket expenses related to your recovery at home.
Critical Illness
Critical Illness plans are designed to provide financial protection if you’re ever diagnosed with a serious condition such as cancer, heart disease, or stroke. These conditions may be covered together under some policies. This type of policy pays out an agreed-upon lump sum amount if you are diagnosed with one of the conditions specified in the policy. The benefit can be used for anything from medical bills, lost income due to time off work, travel costs associated with seeking treatment or follow-up care, special diets, etc. Some plans have optional “recurrence” riders that pay if there is a recurrence of a specified illness meeting criteria as set forth in the policy.
The amount of coverage is usually between $5000-$100,000. Perhaps you want only a small amount to cover health insurance plan deductibles and out-of-pocket limits; or you may wish for a much higher amount to help with not only medical costs but mortgage and auto loan payments, utilities, food and any number of bills you would continue to incur if you are out of work due to your condition.
Cancer
Cancer insurance is designed specifically for those who have been diagnosed with cancer and need extra financial protection while they undergo treatment and recover from their diagnosis. This type of policy pays benefits directly to you. Like other Critical Illness plans, the benefits can be used in any way you choose. There are no restrictions. You choose to put the money wherever you need to.
Heart Attack and Stroke
Heart attack & Stroke policies very often cover both conditions, separately, under the same plan. These plans help cover some of the costs associated with recovering from either condition, such as co-pays or deductibles not covered by major medical plans, lost wages if you need time off work during recovery, modified living expenses due to changes in lifestyle following diagnosis (for example needing special equipment like wheelchairs), etc.
Short-Term Disability and Long-Term Disability
Short-term and long-term disability plans are commonly offered by large employers just like health insurance. Short-term disability plans are just that. They pay a portion of your income, usually 60%, for a short period of time when you are unable to work due to a covered loss. You will have an elimination period and coverage lasts only a few months.
Long – term disability plans typically pay 60% of your income (though some pay more) if you are unable to work for a longer period of time. There are elimination periods and pay up to five years, ten years, or until you retire. You must qualify for long-term disability and coverage may end sooner than the policy time limit if your condition improves.
It is important to understand that short-term and long-term disability plans are not designed to fully replace your income. They are designed to help you through a rough patch while you are unable to work. With short-term disability, it is expected that you will return to work while long-term disability is important in the event you suffer unexpected lengthy health issues.
To conclude the above, critical illness plans are an important way for individuals looking for additional financial protection to guard themselves against unexpected medical costs related to serious illnesses. Depending on which type of plan you choose, they all offer some form of cash benefits paid directly to the insured person that can be used for any number of purposes. With these safeguard policies in place, individuals can be assured they will have access to additional funds, when needed most, in order to cover any unexpected costs they may incur along the way.
In some cases, you have to answer medical questions to purchase these plans. Some hospital plans are available that do not require this underwriting. Plan premiums do increase with age at the time of application but are generally affordable and more than pay for themselves if you have a payout.
To access funds under your plan, you will need to submit a claim with supporting documentation. After approval, you receive funds as outlined in your coverage. I do believe in these types of plans – I have them for myself and my husband to help pay out-of-pocket expenses, just in case.