Comprehensive Guide
Learn more in our Insurance Guide.
How it works
Critical illness insurance pays a single lump sum on diagnosis of a listed condition - cancer, heart attack and stroke headline most lists - with no obligation to prove expenses, which makes sizing the entire design problem. The sum has three jobs. First, replace income through the treatment pause: major-illness recoveries commonly sideline earners six to twelve months, and replacing roughly seventy percent of take-home preserves stability without removing the pull back to work. Second, absorb what health insurance deliberately leaks: out-of-network consults, experimental trials, travel to specialty centres, childcare and housekeeping - indirect costs studies place in the tens of thousands even for well-insured households, alongside deductibles and out-of-pocket maximums that a serious year can trigger across two plan years. Third, buy options: retire a car loan, fund a proper recovery sabbatical or simply keep retirement contributions alive while treatment runs. This calculator sums the income and illness components, subtracts savings and any existing cover, and rounds upward to a purchasable increment. The honest caveat belongs at the end: critical illness is supplementary protection, not disability insurance - it pays once per condition, while disability pays every month a career stays interrupted.Formula
lump sum = (take-home x replace% x pause months) + treatment/travel + out-of-pocket - resources, rounded up to the nearest $5,000
Tips
- Round up to the insurer's issue bands - a $75,000 policy costs little more than a $68,000 one.
- Critical illness pays once per condition; disability pays monthly - they stack rather than substitute.
- Check the survival period (often 14-30 days post-diagnosis) and condition list before comparing prices.
- Employer voluntary CI plans are cheap while employed but vanish at separation - price an individual backup.
- Re-size after big life changes: a second income, a mortgage or a child all move the number materially.
Frequently asked questions
How much critical illness coverage should I get?
Sum the income pause and the leak costs, then subtract resources: nine months at 70% of $5,200 take-home plus $21,000 of treatment and out-of-pocket exposure, minus $15,000 of savings lands near $43,000 - rounded to $45,000. Thin reserves or single incomes argue for the higher band.
What does critical illness insurance pay for?
Anything - that is the design. A tax-free lump sum arrives on diagnosis of a listed condition with no receipt requirement: mortgage payments, trials abroad, childcare or plain income replacement all qualify. Covered conditions typically include invasive cancer, heart attack, stroke and organ failure, with broader policies adding dozens more.
Is critical illness insurance worth it if I have health insurance?
Health insurance pays providers; critical illness pays you. The gap it fills is the indirect bill: cancer-patient studies put non-medical costs in the tens of thousands - travel, lodging, lost earnings - none of which a health plan touches. As pure income protection it overlaps disability cover, so judge the pair jointly.
Does critical illness insurance pay out for cancer?
For invasive cancer, yes, on virtually every policy. Exclusions matter more than inclusions: most base policies exclude early-stage or in-situ diagnoses unless you bought an enhanced version, along with skin cancers other than malignant melanoma. Reading stage definitions and survival periods matters more than counting listed conditions.
What is the survival period in critical illness policies?
A waiting window, typically 14 to 30 days between diagnosis and payout, filtering transient diagnoses. It interacts with look-back rules too: conditions diagnosed within roughly 6 to 12 months before the policy started - or during its first months - are commonly excluded as pre-existing.