How Does Critical Illness Insurance Work?

Supplemental critical illness insurance works much differently than a traditional health insurance policy.

Your regular health insurance plan covers the costs of your health care to your health care providers. If you’re diagnosed with a critical illness, you can also file a claim with your critical illness insurance company. Your critical illness insurance company provides a lump sum payout up to your policy’s coverage limit to you!

Critical illness insurance can help offset health care costs or you can use it for whatever reason you need. You could use the money to pay your health insurance deductible or copayments, or you could even put the money toward mortgage payments, groceries or childcare. 

Because critical illness insurance offers coverage for a wide range of conditions, it can also be beneficial for people who don’t have an emergency fund or are concerned about the financial consequences of an unexpected medical diagnosis.


What Does Critical Illness Insurance Cover?

Critical illness insurance coverage varies by the policy. But generally, here are what a critical illness insurance policy will cover:

Cancer Heart Attack Stroke

End Stage Renal Failure Major Organ Transplant    OTHER

Make sure to read the fine print and understand exactly what the specific critical illness insurance policy covers before buying coverage.

How Much Does Critical Illness Insurance Cost?

Here’s a look at examples of critical illness insurance quotes from insurance companies. These costs are for individual coverage, not group coverage sold on true group pricing, but directly to individuals within a group, so keep that in mind when comparing quotes. If you are a tobacco user, rates do increase.


AGE 10,000 50,000 100,000
20 5.87/6.30 9.37/11.50 13.75/18.00
25 5.87/6.30 9.37/11.50 13.75/18.00
35 6.87/8.16 14.37/20.79 23.75/36.58
45 10.94/14.23 28.31/44.76 50.01/82.93

Your premium is largely dependent on the coverage amount. Here are some additional criteria that insurance companies consider if you apply for an individual critical illness insurance plan:

  • Overall health
  • Age
  • Gender
  • Nicotine use
  • Location

Advantages of Critical Illness Insurance

  • Provides financial protection
  • Benefits can be used for anything
  • Affordable premiums
  • Lock in prices at your current age

Drawbacks of Critical Illness Insurance

  • Doesn’t cover pre-existing conditions.
  • Premiums increase with age – so buy young and lock in price.