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Critical care

How a new type of insurance can help in a time of crisis

by Danny Mensh


Over the past few months, there’s been more of a focus on the uncertainty of health care and its potential increase in out-of-pocket expenses. Because of this, there’s also an increasing need for a developing product called critical-illness insurance.


In a basic and efficient way, this type of insurance is designed to pay specific pre-determined lump sums of cash upon the diagnosis of certain illnesses and conditions. Costs attributed to experimental procedures and treatments, travel expenses, insurance deductibles, and child care are just a few reasons why this tax-free lump sum of anywhere between $10,000 and $1 million can offer a major relief.


Getting covered

More often than not, securing up to $50,000 is completed through simplified underwriting and a limited health review. However, with more benefit interest comes further review of a person’s health history and medical records to determine rates.


Most policies require that the insured survives a period of 28 to 30 days before such a payment is made; then, lump sums or ongoing income can begin. Typically, a specialist must certify the condition, and medical records must be given to the insurance carrier for review during the claims process.


The first critical-illness policy was designed in 1983 in South Africa by Dr. Marius Barnard. It was called dread-disease insurance at the time and paid a benefit if the insured was diagnosed with a heart attack, cancer, or stroke.


During the 1990s, more of these products began to appear throughout Canada and England, with recognition of more conditions. Today, major carriers like Mutual of Omaha, Sun Life of Canada, and Unum are leaders in the field.


According to its Web site, illnesses and conditions that warrant a benefit payment from Mutual of Omaha include a heart attack, life-threatening cancer, stroke, Alzheimer’s disease, or a major organ transplant. The policy also pays 100 percent of the maximum benefit for insured clients with Multiple Sclerosis, paralysis, kidney failure, blindness or deafness, and pays 25 percent of the maximum benefit for those having their first coronary artery bypass surgery, angioplasty, or carcinoma in situ.


Why you need care

So why do you need critical-illness insurance? Suppose you’ve already maximized disability insurance per income and benefit limitations but still have uninsured income. Also, if your employer pays premiums for disability insurance, then your 60 percent benefit becomes something closer to 40 percent.


Suppose you have a high-deductible health insurance plan to help keep premiums down. In this scenario, you might have to increase your deductible to self-insure more risk and assume out-of-pocket expenses, but are you prepared for these expenses if they come?


If you’re self-employed and can handle limited out-of-pocket expenses, then it’s likely that you won’t be able to withstand the cost that would shock your business and personal bank account if you were diagnosed with an illness or condition.


According to the Critical Illness Association’s Web site, financial experts often advise clients to consider coverage equal to two to three years of mortgage payments, plus any credit card balances. It’s a good plan of coverage that can provide peace of mind at a time when you’ll want to focus on recovery and not your bills.


Advances in medical and emergency care are allowing more people than ever to survive catastrophic illnesses, and the chances of contracting and surviving a critical illness prior to retirement are reasonably high. At the same time, medical expenses are higher than ever.


Consider these statistics from the American Heart Association and American Cancer Society:  In the U.S., approximately 1.3 million new cancer cases are diagnosed each year, someone suffers a coronary event every 29 seconds and someone suffers a stroke every 45 seconds.


These plans can be secured individually or in a group setting through an employer. While long-term-care insurance still has its share of mystery and individual disability insurance remains expensive, perhaps securing a pool for critical-illness protection is the right fit for you and your family. 



About the expert

Danny Mensh entered the insurance industry in 1996 and became president of Mensh Insurance in 2007, taking over a family business that has been in existence since 1968. With more than 10 years of experience, Mensh is certified in long-term care and brings an independent approach to discussions concerning life and disability insurance for individuals and businesses. Planning topics range from protecting income due to disability or premature death to estate planning and preservation measures.


Mensh has appeared on radio and has filmed various educational programs on insurance issues, and has written articles in local and regional magazines on the topic. He received a Bachelor of Arts degree from Duke University in Durham and is active in the Duke Alumni Association in North Carolina. He also is a member of the National Association of Insurance and Financial Advisors, National Association of Health Underwriters, and American Association of Long Term Care Insurance. To learn more, call (336) 631-5503, e-mail or visit