What You Can Do To Prevent Bankruptcy Because Of Cancer


During the Health Care Reform debates, the politicians kept scaring Americans to justify their political agenda.

They cited the number of people who had to file bankruptcy even though they had “health insurance.”

What they did not say was that the problem was not caused by their health insurance policy.  The problem was caused by the health insurance portfolio they set up.

In this post I use the question and answer format to explain how to set up your health insurance portfolio to assure that you and your family are not forced to file bankruptcy because of a serious injury or illness.

Q.  If I have Major Medical Insurance can I still go bankrupt if I get sick or injured?

A. Yes.  Major Medical insurance only helps with medical bills.  It does not provide money to pay for the other bills that you will incur if you are injured and unable to earn an income.  In the event of an accident, you will need to use your “Rainey Day” savings to pay for your regular expenses.  In the event you do not have sufficient “Rainey Day” savings, you will need either Disability Income insurance or Critical Illness insurance.

Q.  What does Major Medical insurance pay?

A.  Major Medical insurance pays for most medically necessary medical bills.  It does not pay all medical bills.  Major Medical insurance typically has Exclusions (experimental treatment, cosmetic treatment, etc.).  Major Medical insurance generally uses cost control systems like deductibles and co-insurance.

Q.  What does Disability Income insurance pay?

A.  Disability Income insurance provides a stream of cash while you are laid up with a qualifying injury or illness.  You can use that money to pay for anything that you want.  It makes certain that you do not have to rush back to work before you are ready, lose your home or have to file bankruptcy because you were unlucky enough to get sick.

Disability Income insurance allows you to pay for things like…

  • Major Medical  deductibles and co-insurance
  • Mortgage/Rent
  • Utilities
  • Car payments
  • Groceries

Q.  What does Critical Illness insurance pay?

A.  Critical Illness insurance pays a single amount of cash in the event the insured is diagnosed with one of the covered critical illnesses.  Each insurance company has its own definition of what a critical illness is.  The most common conditions are cancer, heart attack and stroke with other various conditions also covered.  If you are considering a Critical Illness policy, make certain you read the policy to find out what is and is not covered.

The idea behind Critical Illness insurance was to give policyholders enough money to pay for medical treatment from which they can benefit.  Critical Illness insurance can provide the money that is required to pay for deductibles, co-insurance and cost limitations that are present in many Major Medical policies.

The money that Critical Illness provides can, also, be used to pay for experimental treatment that is not covered by any Major Medical policy.

I know that when Dad was sick with Huntington’s disease, he looked into experimental treatment that was available outside of America.  Most Major Medical policies will not pay for treatment outside of America.  The money from Critical Illness insurance would have allowed him to go to a different country to see what they offered.

Critical Illness insurance proceeds can also be used to pay for Long Term Care costs during that policy’s “Elimination Period.”

SUMMARY

Major Medical insurance, on its own, may be all you need for minor, routine health care.  However, it may prove to be too little in the event of a major problem.  If there is a family history of cancer and you are at greater risk of developing that disease, Critical Illness insurance is definitely something for you to consider.  A minimal policy with a benefit of $ 20,000 is less expensive than most people think.

There is misconception about Disability Income insurance.  People think that they have to pay for the maximum benefit that the law allows.  That is untrue.   When you are looking for Disability Income insurance, only pay for the benefit level that you need to pay your bills.  If you can maintain your standard of living with only $ 2000 of cash each month while you are not working, it does not make sense to pay the premiums for a $ 4000 a month benefit.

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