Being diagnosed with a serious illness can change your life. Even if you have a great health insurance plan, a diagnosis like cancer, kidney failure, or a stroke can leave you with massive medical bills. Buying life insurance with a critical illness rider can give you valuable financial help if you ever face such a diagnosis.
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If you are diagnosed with an illness considered a critical illness by your life insurance policy, you will be eligible to receive part of your death benefit while you’re alive. The amount of the benefit will depend on your policy.
Once you’ve been diagnosed, you will file a claim with your insurance company. Your insurance provider will request your medical history to confirm your diagnosis.
When your claim is approved, your insurance provider will send you a lump sum benefit payout. That payout is tax-free. You can use your payout for any expenses. Many people use them to pay for medical bills and related expenses. If you’re unable to work, you might use the benefit to help replace that lost income and pay bills.
If you use your critical illness rider, the benefit you receive is deducted from the benefit that your beneficiaries would receive after your death. If you have a $1 million life insurance policy and your critical illness rider is for $250,000, your beneficiaries would only receive the remaining $750,000.
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A critical illness rider can give you valuable peace of mind, since you will have some financial support to help with a challenging diagnosis and related treatment costs. Having that extra money might help you afford treatments that you couldn’t otherwise access, and it can reduce the financial stress on your family.
If you’re not yet ready to purchase life insurance with a critical illness rider, consider an alternative. Investing in quality health insurance can help you afford healthcare costs. Contributing to a health savings account or flexible spending account can also be a great way to save for healthcare expenses while enjoying tax benefits.
Keep in mind that if you’re considering a critical illness rider, you need to buy it when you buy your life insurance policy. Many critical illness riders are affordably priced, so consider getting a life insurance quote to explore this option today.
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Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.
