Dread Disease Insurance: Have you ever wondered what would happen if you were suddenly diagnosed with a critical illness like cancer or heart disease? How would you pay for expensive treatments and manage daily living while unable to work? Would your regular health insurance provide enough coverage? How would it impact your family’s finances?
Questions like these underlines the need for special protection against the high costs of critical illnesses. Dread disease insurance provides a financial safety net in case you are ever diagnosed with a covered serious health condition.
In this post, we’ll explore what exactly dread disease insurance is, what conditions it covers, who needs it, and everything else you need to know to decide if it’s right for you.
What is Dread Disease Insurance?
Dread disease insurance, also known as critical illness insurance, is a type of health insurance that pays out a lump sum upon the diagnosis of a specified critical illness. It is different from traditional health insurance which pays for medical treatment.
A dread disease policy pays out regardless of any medical expenses incurred. The payout can be used for anything – paying off debts, covering loss of income, alternative treatments, childcare or any other need.
These policies cover between 10-30 severe, life-altering diseases. The covered conditions are clearly defined in the policy. Common examples include cancer, heart attack, stroke, paralysis, coma, major organ transplant, multiple sclerosis, ALS etc.
The payout amount is chosen by you at the time of purchase. It typically ranges between $10,000 to $2 million. The payout is made as a lump sum once to the policyholder after diagnosis.
How Does Dread Disease Insurance Work?
Dread disease insurance works in a simple, straightforward manner:
- Choose coverage amount: When purchasing the policy, you select a benefit payout amount as per your financial needs. This is the lump sum that will be paid out upon diagnosis.
- Pay premiums: You pay a monthly or annual premium to keep the policy active. Premiums are based on factors like age, health, payout amount and length of coverage.
- Get diagnosed: If you are diagnosed with a disease listed in the policy, you file a claim with evidence of diagnosis. The insurer verifies it meets the policy definition.
- Receive payout: Once approved, you receive the full lump sum payout chosen at the time of purchase. This can be used however you see fit.
- Policy ends: The dread disease policy terminates after paying out the full benefit amount. Some policies pay out 25% at early stages of a disease and the rest at later stages.
That’s the simple process! The policy provides a safety net in case you suffer a grievous illness that impacts your finances and life.
What Does Dread Disease Insurance Cover?
Dread disease insurance policies cover between 10-30 of the most common critical illnesses. Here are some of the conditions typically included:
- Cancer: Covers malignant cancers diagnosed after the waiting period, including leukemia, lymphoma and malignant tumors. Early stage prostate or breast cancer may limited or excluded coverage.
- Heart Attack: Covers the death of heart muscle due to blockage of blood flow. This must be evidenced by diagnostic changes and imaging. Angina is not covered.
- Stroke: Covers brain tissue death due to cerebrovascular incident and bleeding. Transient ischemic attacks (TIAs) are generally excluded.
- Major Organ Transplant: Covers undergoing a transplant of heart, lungs, liver, pancreas, kidney or bone marrow.
- Paralysis: Covers complete and permanent loss of use of two or more limbs through neurological damage. Short term paralysis is excluded.
- Multiple Sclerosis: Covers a definite diagnosis of MS with persisting neurological abnormalities and damage.
- ALS: Covers the unequivocal diagnosis of amyotrophic lateral sclerosis by a neurologist.
- Advanced Alzheimer’s: Covers Alzheimer’s disease resulting in significant cognitive impairment that renders independent living impossible.
- Severe Burns: Covers 3rd degree burns over at least 20% of the body surface area.
The list of covered conditions can vary between policies. Make sure you understand exactly which diseases are covered before purchasing a policy.
Who Needs Dread Disease Insurance?
Dread disease insurance is designed to provide financial support in case of a serious illness. Here are some examples of who can benefit from these policies:
- Breadwinners: Helps replace lost income in case the primary earner is unable to work. This provides peace of mind for families depending on that income.
- Middle class families: The middle class is especially vulnerable to financial catastrophe from illness. This policy helps prevent draining savings and 401(k)s.
- People with health risk factors: Those at higher risk due to habits like smoking or obesity can benefit from the financial safety net these policies provide.
- Self-employed professionals: For entrepreneurs, contractors and freelancers, a critical illness can completely wipe out earnings. This policy helps cover costs when you cannot work.
- Nearing retirement: Older individuals who get diagnosed soon after retirement can face high treatment costs on limited savings. This policy helps cover expenses.
- No/Insufficient health insurance: For those without adequate health insurance, this policy helps cover ancillary and non-medical costs associated with critical illness.
Essentially, dread disease insurance provides an extra layer of financial protection for anyone vulnerable to loss of income or high treatment costs from a serious health crisis.
How Much Does Dread Disease Insurance Cost?
The cost of dread disease insurance depends on several factors:
- Age – Premiums are higher for older applicants as risk increases with age.
- Gender – Premiums are higher for males compared to females.
- Health – People with pre-existing conditions, risk factors or family history pay higher premiums.
- Occupation – Those with hazardous jobs may pay higher premiums.
- Lifestyle – Habits like smoking and obesity can increase premiums.
- Coverage Amount – Higher payout amounts mean higher premiums.
- Duration – Longer policy terms have higher overall premium costs.
- Riders – Additional riders like disability coverage increase premiums.
Monthly premiums usually range between $30 to $100 for $100,000 coverage for a healthy 30 year old non-smoker. Those at higher risk may pay several hundreds of dollars per month.
Pros and Cons of Dread Disease Insurance
- Provides lump sum payout for covered critical illnesses
- Payout can be used flexibly for any need
- Covers conditions excluded or only partially covered by health insurance
- Guaranteed renewal regardless of future health changes
- Premiums remain fixed for duration of policy
- Portable across employers and health plans
- Does not cover medical treatment expenses
- Pre-existing conditions may be excluded
- Not all severe illnesses may be covered
- Premiums may be expensive for some applicants
- Waiver of premium rider may not be included
- Hefty premiums paid over time without ever filing a claim
Make sure you carefully evaluate the pros and cons before purchasing a policy.
Tips to Finding the Best Dread Disease Insurance Company
Here are some tips for finding the best dread disease insurance provider:
- Look for an established company with strong financial ratings. This ensures they can pay out claims.
- Check policy definitions of covered conditions. Look for clear, comprehensive definitions.
- Compare included conditions – some insurers offer coverage for more illnesses.
- Look for ability to customize coverage with add-on riders.
- Evaluate premium costs from quotes before choosing a policy.
- Look for ability to port coverage if switching employers or states.
- Check ease of filing and speed of claim payouts from the insurer.
- Consult expert insurance agents to find the right high-value policy for your needs and budget.
Taking the time to find the right dread disease insurance company and policy is important to ensure you get robust coverage at fair premiums.
How to Make Dread Disease Insurance Claim
The process for filing a dread disease insurance claim is straightforward:
- Get diagnosed with one of the policy’s covered illnesses and undergo relevant medical tests.
- Inform the insurance provider of your diagnosis as soon as possible. There may be a waiting period after diagnosis before you can make a claim.
- Fill out the insurer’s claim forms providing details of your diagnosis, doctors, medical tests undertaken and other relevant information.
- Submit evidence of your diagnosis including test reports, doctor’s notes, hospital bills etc. as required by the insurer.
- The insurance company will verify your documentation and ensure your condition meets the policy’s defined criteria. They may request additional medical records or get a second opinion.
- Once the claim is verified, the insurer will process payout of the full lump sum benefit amount per policy terms. This is generally paid within 2-3 weeks after claim approval.
- You get to use the payout as you see fit – medical bills, recuperation, supplementing lost income etc.
The process is designed for speedy claim settlement so you can focus on recovery. Make sure you understand the claim process before buying a policy.
Tax Benefits of Dread Disease Insurance
There are certain tax advantages to having dread disease insurance:
- Premiums paid may qualify for income tax deductions under Sec 80D up to Rs. 25,000 annually.
- Payout benefits are generally tax free for policyholder under Sec 10(10D) as health insurance.
- Rider premiums for disability coverage also get tax deductions under Sec 80D.
- Rider payouts for disability are tax free income.
So dread disease insurance helps safeguard your finances from critical illness while also providing tax savings annually on premiums paid. Consult a tax advisor to determine precise benefits based on your coverage.
Alternatives to Dread Disease Insurance
Some alternatives to dread disease insurance include:
- Life insurance: Provides death benefits to beneficiaries and may include an accelerated death benefit rider for critical illness.
- Disability insurance: Covers loss of income from illness/injury preventing you from working.
- Health savings account (HSA): Tax-advantaged savings can be used for medical bills or long-term costs of a chronic disease.
- Self-funding: Setting aside dedicated savings as an emergency fund in case of critical illness expenses.
- Medicaid/Medicare: Government health programs can provide assistance for disabled and seriously ill individuals.
Each option has pros and cons. A comprehensive financial plan likely includes a mix of dread disease insurance, disability coverage, retirement savings and other tools.
Dread disease insurance can provide vital financial support in the event of a devastating cancer, heart attack, stroke or other covered illness.
It pays a lump sum to use flexibly after diagnosis. Though expensive, premium costs may be well worth the peace of mind.
Carefully consider your health risks, existing coverage and income needs to decide if this policy suits your situation. With proper planning, you can safeguard your finances even in the face of life-altering critical illness.