I’m sure you’ve seen articles touting critical illness insurance as one of the fastest growing voluntary products. Let’s discuss some drivers of its growth.
Medical plan gaps have received a great deal of attention as deductibles have been rising due to the trend toward high-deductible health care plans. PPACA-related medical insurance plan designs often leave the insured with significant out-of-pocket medical expenses. The awareness of these gaps is often cited as a primary driver of the need for CI: In the event of a critical illness, the out-of-pocket expense maximum is likely to be reached immediately, and CI fills the gap.
Uncovered medical expenses include the extra cost of going outside a health care plan’s network or authorized coverage. My wife’s best friend is an example. She had an aggressive form of cancer but her primary care physician didn’t authorize the treatment plan she felt would be best. So she decided to go to the Mayo Clinic for a second opinion. They agreed with her and she had a procedure outside her plan’s coverage. Fortunately, she was able to convince her insurance plan to extend coverage, but many are not so fortunate. CI can help here, and as we look forward to the increasing focus of medical plans on narrow networks, this need is likely to grow.
Loss of family income is a fact of life when a family member has a critical illness event. While disability income protection may provide some income replacement for the person who experiences the event, there’s no similar protection for the lost income of other family members who take FMLA time during the recovery period. The critical illness of a spouse or child isn’t only traumatic personally—it can be devastating financially unless there is insurance in place.
Expenses associated with recovery from critical illness not generally covered by medical insurance include family travel, home adaptations, purchase of durable medical goods, and so on. I think of my own situation. We have immediate family members in Utah, Indiana and Wisconsin—as well as Nebraska. We would be faced with huge travel costs if a critical illness struck one of us.
Preserving retirement savings is one of the drivers of need for CI that’s often overlooked. Most people who undergo a critical illness event will survive the event, but in doing so the expenses associated with the illness often force them to deplete their retirement savings, whether the money is in retirement plans like IRAs or 401(k)s, or in indirect sources of savings like home equity. CI can help preserve savings assets so they are available for the long haul.