How it works
Critical illness insurance pays a single lump sum on diagnosis of a listed condition - cancer, heart attack and stroke headline most lists - with no obligation to prove expenses, which makes sizing the entire design problem. The sum has three jobs. First, replace income through the treatment pause: major-illness recoveries commonly sideline earners six to twelve months, and replacing roughly seventy percent of take-home preserves stability without removing the pull back to work. Second, absorb what health insurance deliberately leaks: out-of-network consults, experimental trials, travel to specialty centres, childcare and housekeeping - indirect costs studies place in the tens of thousands even for well-insured households, alongside deductibles and out-of-pocket maximums that a serious year can trigger across two plan years. Third, buy options: retire a car loan, fund a proper recovery sabbatical or simply keep retirement contributions alive while treatment runs. This calculator sums the income and illness components, subtracts savings and any existing cover, and rounds upward to a purchasable increment. The honest caveat belongs at the end: critical illness is supplementary protection, not disability insurance - it pays once per condition, while disability pays every month a career stays interrupted.
Formula
lump sum = (take-home x replace% x pause months) + treatment/travel + out-of-pocket - resources, rounded up to the nearest $5,000
Tips
- Round up to the insurer's issue bands - a $75,000 policy costs little more than a $68,000 one.
- Critical illness pays once per condition; disability pays monthly - they stack rather than substitute.
- Check the survival period (often 14-30 days post-diagnosis) and condition list before comparing prices.
- Employer voluntary CI plans are cheap while employed but vanish at separation - price an individual backup.
- Re-size after big life changes: a second income, a mortgage or a child all move the number materially.
Frequently asked questions
- How much critical illness coverage should I get?
- Sum the income pause and the leak costs, then subtract resources: nine months at 70% of $5,200 take-home plus $21,000 of treatment and out-of-pocket exposure, minus $15,000 of savings lands near $43,000 - rounded to $45,000. Thin reserves or single incomes argue for the higher band.
- What does critical illness insurance pay for?
- Anything - that is the design. A tax-free lump sum arrives on diagnosis of a listed condition with no receipt requirement: mortgage payments, trials abroad, childcare or plain income replacement all qualify. Covered conditions typically include invasive cancer, heart attack, stroke and organ failure, with broader policies adding dozens more.
- Is critical illness insurance worth it if I have health insurance?
- Health insurance pays providers; critical illness pays you. The gap it fills is the indirect bill: cancer-patient studies put non-medical costs in the tens of thousands - travel, lodging, lost earnings - none of which a health plan touches. As pure income protection it overlaps disability cover, so judge the pair jointly.
- Does critical illness insurance pay out for cancer?
- For invasive cancer, yes, on virtually every policy. Exclusions matter more than inclusions: most base policies exclude early-stage or in-situ diagnoses unless you bought an enhanced version, along with skin cancers other than malignant melanoma. Reading stage definitions and survival periods matters more than counting listed conditions.
- What is the survival period in critical illness policies?
- A waiting window, typically 14 to 30 days between diagnosis and payout, filtering transient diagnoses. It interacts with look-back rules too: conditions diagnosed within roughly 6 to 12 months before the policy started - or during its first months - are commonly excluded as pre-existing.