The dread disease insurance plans pay a fixed dollar amount

You may live in an area with a high incidence of a particular disease or condition. Perhaps family history raises concerns about your susceptibility to a critical illness or disease. In these situations, you may want to consider setting up a financial cushion beyond what your health insurance policy offers in anticipation of above-average medical expenses. Some insurance companies offer specified or dread disease policies, most commonly cancer insurance. These policies pay a cash benefit for procedures and treatments that conventional medical insurance may not cover.

The dread disease plans pay a fixed dollar amount for every day you’re in the hospital or receive treatment on an outpatient basis only if you contract the specific disease or group of diseases that the policy cites. Don’t think of a dread disease policy as a replacement for general medical coverage: The policy may limit the amount of benefits it pays. In fact, some states regard dread disease policies as offering little value or protection to the policyholder and have banned or restricted such policies. The cost of a dread disease policy may not be very high because it covers very specific conditions. Even so, weigh the cost of the policy carefully compared to the benefits it pays before you buy.

Shopping for a plan

Think about your family history and lifestyle as you shop for a dread disease policy: These factors may help you get a sense of whether you’re at risk for a particular disease. Start by examining plans carefully, because they often exclude coverage for problems resulting from the specified disease itself, such as infections, diabetes, and pneumonia. In some cases, you have to wait several years after you buy a policy before the plan will pay for treatments. Always check the fine print for the following:

- All-inclusiveness: Benefits should include expenses for items such as hospital stays, medicine, surgery, doctors’ visits, radiation treatment, chemotherapy, and reconstructive surgery after a mastectomy.

- Additional benefits during a hospital stay: You may find a policy that offers additional benefits after you’ve been in the hospital for more than 90 days. Be warned, however, that research states that the average hospital stay for cancer is only 13 days.

- Travel expenses: When treatments mean traveling long distances to a hospital, you definitely want a policy that covers your travel expenses and perhaps travel expenses for a companion.

- Double coverage pay: Keep an eye out for whether the dread disease insurance plan will pay benefits even though you’re covered under another policy. Also check whether the other policy will pay benefits if you have a dread disease policy.

Most dread disease insurance policies exclude people who have already been diagnosed with the disease.

Experimental procedures

Insurance companies often pay for bone marrow transplants and stem cell transplants to treat leukemia and lymphoma. However, insurers may not pay for these types of transplants when they’re used to treat other types of cancer, where they’re still considered experimental. When you’re evaluating a dread disease insurance plan, ask about how the plan pays for experimental procedures.

Paying the price

Some dread disease insurance plans do one or more of the following:

- Adjust premium payments based on your lifestyle or family history

- Pay an initial lump sum and then pay for various costs

- Pay a single lump sum at the time of initial diagnosis and then end the coverage (which helps to lower their premiums)

- Increase premiums as you age