Insurance carriers are offering new products that pay a lump sum to policyholders diagnosed with a serious health condition. (See Critical Care, the Insurance Industry’s Latest Push in the Wall Street Journal.) In the past such policies usually only covered cancer, but have expanded to include other serious illnesses that patients used to die from but which they are now more likely to survive.
One reason for the plansâ€™ popularity is that medical expenses now contribute to about half of personal bankruptcies. Many of those affected actually had health insurance when they got sick. The problem are that insurance doesnâ€™t cover every expense, patients may stop working and lose their employer based coverage, and premiums may become affordable for those with individual coverage.
Critical care plans serve a need but there are other solutions:
- An expert quoted in the Journal suggested investing in a personal trainer instead to stay healthy. That may work in the aggregate but wonâ€™t help someone who gets heart disease or cancer anyway
- Disability insurance is another alternative. A critical care policy holder quoted in the article was worried because his disability insurance only covered 60 percent of his salary, but he probably didnâ€™t realize that unlike his salary the disability payout is non-taxable
- Saving a higher percentage of income. That way youâ€™re more prepared for whatever strikes, whether itâ€™s on the list of covered conditions or not