No one wants to think about what would happen if they contracted a critical illness like cancer or had a major heart attack. However, critical illnesses affect millions of people every day. Take several steps today to prepare financially for a critical illness.
What are critical illnesses?
- Kidney failure
- Organ transplant (heart, kidney, liver, lung, pancreas)
- Brain tumor that requires surgery
- Multiple Sclerosis
- Severe burns
- Blindness
- Paralysis of two or more limbs
- Dismemberment of two or more limbs
- Stroke
- Heart attack
- Heart surgery
- Cancer
Understand the financial risks
A critical illness could cost you thousands of dollars in out-of-pocket expenses. How will you pay for co-pays, childcare, or loss of income?
One study found that loss of income alone can exceed $50,000, and those expenses could quickly wipe out savings or tempt you to go into debt or borrow from your retirement plan. Consider whether you need supplemental loss-of-income protection or other coverage options such as Food-Borne Illness / Loss of Income Insurance that may help bridge gaps in income.
Access your cash value life insurance benefit
While life insurance doesn't keep you healthy, a cash value policy can provide a source of funds if you become critically ill. Check your policy terms and discuss options with your insurance professional to understand any tax or repayment implications.
Boost savings
A flexible spending account (FSA) or health savings account (HSA) through your employer can set aside pretax money from each paycheck into a designated account. Those funds can cover non-reimbursed medical costs like deductibles, copays, and medication.
You'll also want to start an emergency fund to pay for everyday expenses like transportation to the doctor's office or childcare.
Add coverage to your mortgage insurance
If you already have mortgage insurance, consider adding critical illness coverage. The extra protection can help cover medical and living expenses so your home payments remain manageable while you recover.
This coverage can provide a lump-sum payment or specified benefits to help pay for medical treatments, household help, or other costs. Ask your employer if it is available through benefits, or consider options such as Critical Illness Insurance Programs that work with independent agents and insurers.
Before you buy, compare benefit amounts, definitions of covered conditions, waiting periods, and exclusions, and discuss with an agent to make sure a policy fits your needs.
Preparing for a critical illness should be a priority today
You can start saving and reviewing coverage in several ways, such as setting up an HSA, building an emergency fund, or checking existing life and mortgage policies for available benefits. Which step will you take first?