The Average Cost of Critical Illness Insurance

The average cost of critical illness insuranceWhat is the average cost of critical illness insurance? Many of our prospective clients ask this question to get a feel for what they might need to spend every month. The short answer is: it depends.

More important than average costs is the need and the value. Without first understanding the need and value it does not matter whether the premium is one dollar a month, ten dollars a month, or a hundred dollars a month.

The average cost depends upon a number of variables which we will explore in more detail below:

  1. What the policy covers
  2. Your age at time of application
  3. The size of benefits


The Value of Critical Illness Insurance

Who care about the average cost of critical illness insurance without first understanding its value to the policyholder? There are two primary areas of value: a financial safety net, and an opportunity to make an informed bet using your personal and family history.

Safety Net

Critical illness insurance provides a financial safety net by making payments directly to the insured when he or she is diagnosed and/or treated for a covered illness. These extra payments come at a time when the need may be greatest.

Anyone suffering from a critical illness is likely to experience the triple threat of left over medical bills, non medical bills, and lost income. When people are very sick they are more likely to seek care from specialists, and from providers that are outside of their primary insurance plan network. There are often large copayments, deductibles, and amounts above usual customary and reasonable. Quite often patients are unable to work and lose income as well.

Informed Bet

Critical illness insurance is a specified disease policy. It pays benefits only when the policyholder is diagnosed or treated for the specific illnesses listed in the policy. Some look at this fact as a problem, while others see the opportunity.

People with a family history or other pre-disposition to a specified illness can purchase a policy that covers a narrow range of maladies. Why pay premiums for a policy that covers everything under the sun, when you can purchase a policy that covers maladies you are likely to encounter, based upon your personal history?

Follow the logic and critical illness insurance makes sense for certain populations. For example, many standalone cancer only plans do not ask whether you smoke.

The Average Cost of Critical Illness Insurance

When considering the value, we can only project and assume that the coverage may be needed. When it comes to determining the average cost of critical illness insurance it is much easier to be more precise.

What your Policy Covers

The first element is narrowing down the “average cost” is to consider what specified illnesses a certain policy may cover. There are standalone policies, and those that lump many medical conditions together. These are some of the specified illnesses that can be covered:

  • Cancer
  • Heart attack (Myocaridial Infarcation)
  • Stoke
  • Major organ failure
  • End stage renal failure
  • Coronary artery disease

Standalone cancer insurance policies are very common. The average cost ranges from ten to fifteen dollars per week for an individual. Other policies may lump cancer together with the other specified conditions and have a higher average premium cost.

Age at Time of Application

The average cost of critical illness insurance may rise with your age at time of application. For many combination policies the age rating factor can have a profound impact on the monthly premiums paid. Many of the specified illnesses are far more common as we age.

Once approved for a policy the average cost remains the same throughout the life of the policy. Even as you age into higher risk tiers, the premium rate paid is locked in.

On the other hand standalone cancer policies are priced uniformly by age. A twenty year old male pays the same premium as a sixty year old female.

The Size of Benefits

The average cost of critical illness insurance is also determined by the size of benefits you elect. Many policies simply make one benefit payment upon the diagnosis of a specified disease. The lump sum amount can range from a low of five thousand dollars on up to hundreds of thousands of dollars.

  1. Policy one pays a five thousand dollar lump sum
  2. Policy two pays a twenty thousand dollar lump sum
    1. Therefore -
  3. Policy two will cost four times as much as policy one

Other policies pay based upon a defined schedule of procedures performed as a result of your illness. As each procedure is performed the policy makes a payment (after you file a properly supported claim). There may be four sets of benefit schedules:

  1. Basic
  2. Preferred
  3. Premier
  4. Platinum

The names will vary by carrier. But the concept remains the same. The higher the benefit level you consider, the higher the average cost of critical illness insurance.