Surviving a critical illness event

However, there is another side of recovery that needs to be considered. Hidden costs associated with those unplanned, non-insurance expenses can become very burdensome when recovering from a critical illness event. These can run the gamut of maintaining the household, to additional transportation expenses, or even just paying the monthly bills. This load can be felt even with the best of medical and income replacement planning. For example, the American Heart Association says the average charge for coronary artery bypass grafting in 2004 was estimated at $85,653. Medical problems from a life-threatening illness, especially those resulting in inability to work, have a direct impact on mortgages.

"We're all one serious illness away from bankruptcy", as the author of a Harvard study of bankruptcy in the United States found.

Survival is just the first step as the event can be a financial concern as much as an emotional trial. A critical illness can make a devastating impact on a family and cause the standard of living to deteriorate because of loss of ability to work, even for families with excellent health insurance. Critical illness insurance helps protect day-to-day standard of living as well as the retirement resources in our asset-accumulation stage.

There are some commonly held misconceptions about these issues:

1. For those of us relying on health insurance to protect us from illness costs, some of the light shone upon bankruptcy filings can give pause. It is not exclusively the uninsured who suffers financially from an unexpected illness. Three-fourths of medical debtors in a Harvard bankruptcy filing study had health insurance. Health insurance has maximum lifetime limits, exclusions and does not provide for indirect costs. Co-payments, deductibles and out-of-network charges over a long period of time can drain otherwise stable income.

2. The result of surviving or living with a critical illness diagnosis is often an increase in non-medical expenses and loss of employment income. These can disrupt the household finances' balance (think of all the monthly payments an average family or single person makes, on a paycheck-to-paycheck basis).

3. A critical illness diagnosis striking anyone in a family can affect the whole household. Thirty-five percent of people who filed for bankruptcy had to cut their employment because of an illness, and often that was to care for someone else in the family. Such real life scenarios include: when an illness leads to job loss which leads to loss of workplace health coverage; or when the spouse must take time off from work to accompany patient to treatment and at the same time take over increased child care load.

CI advantages

An insured lump sum benefit from a company in the event of a Critical Illness diagnosis can be applied to:

o Lost income from reduced ability to work full time
o Lost wages for a family member to accompany the patient to treatment facilities
o Transportation, food and lodging e.g. when traveling to a specialized facility
o Increased childcare expenses
o Help pay for mortgage and other loans

Receiving a lump sum payment upon diagnosis makes financially possible more options for treatment. These can include:

o Travel to see specialists away from home; out-of network specialist charges
o Alternative treatment not covered by health insurance
o Experimental drugs
o Private nurse
o Use towards deductibles in medical insurance

Other factors to consider

o Group critical illness insurance is independent of any other insurance and is paid directly to the employee.
o The employee does not need to be disabled or terminally ill. Diagnosis with a covered condition is the trigger for benefit payment.
o Coverage does not have to end after the first benefit payment – critical illnesses can recur that may result in financial demands on already stretched resources. An employee may get a second benefit payment if subsequently diagnosed with a different covered, unrelated critical condition; in addition, employee may get a recurring benefit payment upon recurrence of the first diagnosed and paid condition.

The supplementary and voluntary nature of critical illness makes it a perfect employer-offered asset protection and living benefit at no extra cost, enabling employees to decide how to spend the dollars they have on the costs that mean the most to them.

Roumjana Zhecheva is a product manager for Group Critical Illness at Domestic Accident & Health, AIG Commercial Insurance.