Critical Illness and Accident Insurance
Critical illness insurance can provide a lump sum payment for certain illnesses, such as stroke, cancer, or heart attack. This insurance cover expenses not typically handled by standard medical insurance in the event of severe health emergencies or accidents. These policies can provide financial relief for costs such as additional childcare, travel expenses for family members coming to assist, and lost income during recovery periods. Typical face amounts are small — $2,000, $15,000, $30,000 — and the covered-condition list, the definitions inside it, and the child-coverage terms vary considerably from one employer’s plan to the next.
Skip it. For a reader with the balance sheet this book assumes, critical illness insurance fails the large-loss principle from the chapter opening in both directions: the payout is too small to matter against a genuine catastrophe, and the events it covers are already handled by the coverage you should already own — medical insurance for the treatment, disability insurance for the lost income (section “Disability Insurances: Covering Your Lost Income”), and Tier 1 cash for the incidental costs it advertises. A $30,000 lump sum is trivial against a serious cancer diagnosis and a non-event against a household that has followed the rest of this chapter. Worse, the definitions are narrow in ways buyers do not expect: many policies pay only on a heart attack meeting specific enzyme and ECG criteria, or a cancer above a stated stage, so the diagnosis you actually receive frequently is not the diagnosis the contract names.
The narrow exception is the same as for AD&D (section “Accidental Death and Dismemberment (AD&D) Insurance”): take it if the employer pays for it. Free coverage of a real risk is worth accepting. Do not count it in any needs analysis, and do not pay for it out of the same dollar that could raise your disability benefit.
Before electing any employer critical-illness or accident plan, ask three questions:
- Who does it actually cover — and on what terms? Employer plans differ widely on whether spouses, children, or dependent parents are included and at what percentage of your face amount. Read your own plan document; do not assume another employer’s terms.
- What costs would you face that your medical insurance, leave policy, disability coverage, and travel insurance do not already cover?
- Can Tier 1 cash absorb that residual? If yes — and for most readers here it is — decline.
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