Critical illness insurance

LIFE expectancy has increased around the world, and the top causes of death have declined by 54 percent from 1900 to 2010. However, every year, thousands of people will suffer a stroke or heart attack, and thousands more will be diagnosed with cancer. According to the American Cancer Association, one in three people are at risk of cancer.It is also expensive.

The American Cancer Society revealed that Americans spent a total of $80.2 billion for cancer treatment in 2015.  The American Heart Association reports that more than 320,000 out-of-hospital cardiac arrest occur annually in the United States. For every 1,000 people who are 50 years old, it has been estimated that 12 to 15 might experience one of the five conditions often covered by critical illness polices: cancer, heart attack, stroke, renal failure or a major organ transplant. Ninety percent of the insurance claims are tied to the first three: cancer, heart attack and stroke. 

Critical illness is a life-threatening disease or medical condition that involves ever-increasing medical costs.This medical cost can be financially devastating and can be an enormous out-of-pocket burden.The cost of the medical treatment is not the only burden. The decreased ability to earn money and the loss of income adds not only to the financial burden but contributes to the patient’s poor health caused by stress. 

What is critical illness insurance?

CRITICAL illness insurance, on the other hand, is an insurance policy which pays out directly to the insured if the policyholder is diagnosed with a serious medical condition. It is also called critical care insurance. The insured may spend the proceeds as he wishes, whether for medical or non-medical bills. In other words, it is not an annuity benefit and it is not based on reimbursement. The clear import is that critical illness insurance will help reduce a patient’s financial burden. As stated by Stephen Rowley, a vice president at Gen Re, “the intention behind critical illness insurance was to help patients pay for the high cost so often associated with surviving a critical condition.”

While life insurance pays upon the death of the insured, and disability insurance pays when the insured is no longer able to work, critical illness insurance addresses the financial burden brought about by the diagnosis of a critical illness. Disability insurance may cover only a portion of the financial burden. If one wants to be covered airtight, one will have to get a comprehensive health insurance, disability insurance, critical illness insurance and life insurance. 

Critical illness insurance is a type of health insurance. There are variations of health insurance. Critical illness insurance has been described as a “supplemental” insurance plan that fills in gaps in the health insurance coverage.It has been found that the majority of critical illness insurance claims were for heart attack, stroke, and cancer. The average age of claimants is 41 years old. 

Typical features 

CRITICAL illness insurance coverage, as well as the critical illness covered, varies among the different insurers. Typically, a lump-sum amount is paid to the insured when an insured is diagnosed with the critical illness covered. Payments, however, can be structured to be paid on a staggered basis. This insurance cannot be purchased after the critical illness has been diagnosed. It is usual that a period of time be stipulated for one to be covered before certain ailments qualify for coverage.There is also the survival period (or waiting period) where the policy may require the policyholder to survive for a minimum number of days (usually 15 to 30 days) from the time the illness was first diagnosed.Certain coverages offer the option to travel to highly specialized hospitals in other countries to receive treatment.A severity-based cover or tiered coverage may also be provided wherein payments are made depending on the severity of the diagnosis, such as early-detection benefits.

A critical illness insurance, being for critical illnesses only, does not replace a typical health insurance policy. It is designed to supplement an existing health coverage. 

Social benefit of critical illness insurance

AFTER China implemented critical illness insurance in 2012, a study was made to determine if such insurance coverage benefited the rural poor of China by reducing the out-of-pocket expenditures. The study concluded that the program “effectively reduced the financial burden of patients with high medical cost, whether in the short term or a longer length of time. It also improved health equity in health service utilization and expenditure.” No specific study has been completed yet in the Philippines. 

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President Duterte as the new insurance commissioner in December 2016. E-mail: dennisfuna@yahoo.com.


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