DEFINITION: A critical-illness plan is a policy that pays the insured a lump sum following the diagnosis of an illness covered under the plan. Critical-illness plans often cover diseases like cancer, organ transplant, heart attack, stroke, renal failure, and paralysis, among others. There is no coverage if you’re diagnosed with a disease that isn’t on the specific list for your plan, and the list of covered illnesses varies from one plan to another.
There are many different critical-illness plans available, with benefit amounts ranging from $5,000 to $200,000 or more. Premiums are based on the benefit amount and the age of the applicant. In the individual market, pre-existing conditions are not covered, and medical underwriting is used to determine an applicant’s eligibility for coverage. Critical-illness plans are not regulated by the ACA and are not suitable to serve as a person’s only medical coverage.