5 steps to take before you buy cancer insurance
Cancer insurance sounds like a good idea when you hear frightening statistics about the prevalence of the disease.
According to the most recent figures from the U.S. National Cancer Institute, women have about a 1-in-3 chance of getting cancer, and men have an almost 1-in-2 shot at developing the disease sometime in their lives.
Insurance companies are only too glad to pass those details along in their marketing materials.
But don't let dread of the disease compel you to buy a policy before you've had a chance to research the options. Follow these five tips first.
1. Invest in good health insurance.
Make sure you have a good comprehensive health insurance policy to cover all your medical needs before thinking about a cancer policy. Cancer insurance is supplementary coverage -- it pays out only if you're diagnosed with cancer, and it doesn't cover all your treatment costs for the disease.
2. Consider alternatives.
Cancer insurance policies say they'll provide benefits over and above what your health insurance provides to help you make ends meet while undergoing treatment.
Don't overlook other ways to financially plan for emergencies. Make sure you have a good disability insurance policy, which pays a portion of your income if you can't work because of a disability, such as cancer. Set money aside in a savings account for emergencies. Have a health savings account with a high-deductible health plan? Contribute as much as you can to the account. Unused money rolls over from one year to the next and can be used for out-of-pocket health care expenses.
3. Research and compare policies.
Cancer insurance policies vary widely in how they're structured. Some policies pay a percentage of expenses for treatment up to a maximum dollar amount. Others pay a flat amount for each benefit you receive. Newer policies pay a lump sum, which you can spend on anything -- car payments, mortgage, travel expenses -- you name it.
Some policies, known as critical illness insurance, cover cancer as well as other diseases, such as heart attack and stroke.
4. Understand the definitions and exclusions.
Learn how the insurance company defines cancer. What are the limitations and exclusions? How long do you have to wait from the time you buy the policy to when you're eligible for benefits? Read the fine print.
5. Don't buy duplicate coverage.
There's no sense in buying insurance that duplicates what you already have. Make sure the policy provides benefits above and beyond your current coverage. Call your health insurance carrier as well as consulting the cancer insurance policy to make sure both would pay out if you developed cancer.
Finally, only do business with insurance companies that are licensed in your state and have solid financial and customer service reputations. Check company financial ratings with a ratings agency, such as Standard & Poor's or A.M. Best, and log on to your state insurance department's website to look up company complaint ratios.