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Patient Support // June 24, 2016 MAAC Staff

When Cancer Insurance Makes Sense (And When It Doesn’t)

If there is one disease that strikes dread in the hearts of many people, it is cancer.  Not only does it have a high mortality rate, it is a painful way to die and the treatments can at times seem worse than the disease itself.

And then there are the bills. Even people with good health insurance can find cancer to be financially debilitating, which is why many insurance companies have developed insurance policies specifically for dealing with cancer expenses.

What is Cancer Insurance?

Cancer insurance is an insurance policy that pays only after cancer has been diagnosed. Cancer insurance is supplemental insurance, and most types pay policyholders a lump sum upon diagnosis with a covered cancer, while others offer supplemental payments for healthcare costs.

Lump-Sum Payment: Many cancer insurance policies provide a lump-sum payment, up to the policy limits, upon a cancer diagnosis. Typically, this money can be used for whatever the policyholder chooses, whether for travel expenses (such as for traveling to a specialist or cancer center), co-payments, experimental treatments, or even living expenses.

Supplemental Payments for Healthcare: These payments are made according to a schedule listed with the policy and are in addition to what is paid by any other insurance.  In other words, this insurance does not pay a percent of your bill; it pays a certain dollar amount for each covered category such as radiation treatment, x-rays, surgery, or hospice care.

The expenses paid by a cancer insurance policy depend on the terms of the policy, which should be reviewed carefully before purchasing a policy.

Who Can Purchase Cancer Insurance?

Cancer insurance is offered as a supplemental benefit by some employers. Individuals can also purchase their own policies. Many well-known insurance companies offer individual polices.

Nevertheless, cancer insurance is insurance – protection against the unknown. Once cancer has been diagnosed, a policy cannot be purchased to cover that cancer, and it may be difficult or impossible to purchase any cancer policy.

Advantages and Disadvantages of Cancer Insurance

The main advantage of cancer insurance is that it pays money that can be used to pay for treatment that is not covered by standard health insurance, and even to cover non-medical expenses, such as mortgage/rent, food, travel, and other unexpected costs that may crop up.

The primary disadvantage of cancer insurance is that, like all insurance for which a policyholder is paying the entire premium, most people are going to pay far more in premiums than they will collect in benefits. Not everyone who buys cancer insurance will get cancer, and for those people, the money they pay in premiums will be gone for good.

Another disadvantage of cancer insurance is that it only pays in the case of a cancer diagnosis. While that limits the premium, it also potentially leaves the policyholder exposed to financial problems if other serious illnesses occur. Some companies solve that problem by offering a policy that covers the “big three” expensive long-term problems: cancer, heart attack, and stroke.

Who Should Get Cancer Insurance?

First things first, it is generally not a good idea to purchase cancer insurance if you do not already have general health insurance. A general health insurance policy will cover many different types of conditions and diseases – including cancer – while cancer insurance only pays out if you receive a cancer diagnosis. Since the diagnosis process itself can take months, or even years in some cases, the bills can rack up long before a diagnosis becomes final.

If you already have a general health insurance policy, you may want to consider cancer insurance if you meet any of the following criteria:

  • You have a family history of cancer
  • You have been exposed to known carcinogens, such as asbestos or tobacco smoke
  • You meet any of the other risk factors for cancer, such as increased sun exposure, chronic inflammation, or obesity

If you do not meet any of these conditions, cancer insurance may not be right for you.  Remember, the purpose of any insurance is to protect against things that you cannot afford to have happen. While no one wants cancer to happen, those who have adequate health insurance, savings, and disability insurance can probably afford for it to happen.

Those without health insurance will find that cancer (or any serious illness) will wipe out their assets, and the relatively low value of a cancer policy is not likely to prevent that.  Those with good health insurance but few assets may find peace of mind in purchasing cancer insurance.

If cancer insurance is offered in the workplace, determine whether the premiums are subsidized by the employer, and to what degree. The more heavily the employer subsidizes the plan, the more employees should consider it, providing those benefit dollars cannot be used better elsewhere.

What to Consider Before Buying Cancer Insurance

Those considering purchasing a cancer policy should take the following points into account:

Are the premiums affordable? If the policy is not in effect when needed, it is useless.  If the policy lapses due to non-payment there, may be a premium increase upon reinstatement. Limited benefits periods may also apply again.

Is there a period of limited benefits, and if so, how long is it? Some cancer policies will simply return paid premium, or will pay less than face value of the policy for a certain length of time.

Are there better ways to meet the objectives of having this insurance? Are you really trying to protect yourself against cancer, or do you want to protect yourself in the event of any debilitating disease or catastrophic health event? Would another option better suit your goal?

Alternatives to Cancer Insurance

People purchase cancer insurance to protect themselves from the co-pays and deductibles their health insurance does not pay, to pay living expenses if they are unable to work, and to pay for treatments that are not covered by their insurance or travel expenses to major cancer centers. For many people, there are alternatives other than cancer insurance that may provide better protection – perhaps even at a lower cost.

Disability Insurance: While disability insurance is expensive compared to a cancer policy, it will pay a percent of your income after you have been disabled, whether by cancer or some other condition, for a certain period of time. In the long run, this may be a better option for providing for yourself and your family in the event of a major health incident, including cancer.

Health Savings Account: People with high-deductible health insurance plans can save money pre-tax in a Health Savings Account (HSA), which can be used to pay any medical expenses, including costs related to cancer. While HSA contributions are limited year to year, the good news is that it rolls over so the money in your account is always available. It will likely earn little or no interest, but it will be available for when you need it most.

Personal Savings/CD: If you are not able to save money in an HSA, you can still set up your own personal savings account or certificate of deposit (CD) to create your own health fund. (Keep in mind that a CD takes time to mature, so it may be best to split your funds between several “rolling” CDs that mature at different times throughout the year.) Setting aside the same amount that would otherwise spend on cancer insurance premiums may be a more flexible option for many people.

More Comprehensive Health Insurance: If you have enough money to pay the premium on cancer insurance, it might be better to use that money to upgrade your general health insurance plan instead. A lower-deductible major medical plan that covers all illnesses, including cancer, may make the most financial sense in the long run.

Ultimately, the decision whether to buy cancer insurance is an extremely personal one. If you are at risk of developing cancer, it make make sense to do so. Otherwise, one of these other options may work out for the best. Whatever your decision, hopefully, the information here is helpful in choosing the right option for you.