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Can a Critical Illness Insurance Policy be Declined?

In the early 1900s, the average American lifespan was around 50 years old1. In 2019, the average lifespan has risen to about 78 years old1. As the average life span of Americans continues to increase, insurance companies are trying to ensure Americans can afford the cost of getting older.

Several factors go into the approval process of critical illness coverage including amount and extent of coverage, gender, age, health of insured, and family history.

Overview of critical illness

Critical illnesses, such as heart attacks and strokes, typically require extensive medical care and treatment, as well as maintenance treatment and medication. Due to the large stressors put on American families from health issues, insurance companies began offering separate critical illness insurance coverage around 1996. Most critical illness insurance policies cover the top four common health problems: heart attack, stroke, cancer, and coronary bypass surgery.

A critical illness policy can help pay for costs not covered, by traditional insurance. It can also help cover non-medical costs related to the illness such as transportation and lodging for treatment, child care, income replacement for the patient and their spouse, etc. The benefit typically comes in a cash lump amount that can range anywhere from $1,000 to $100,000.

Several factors go into the approval process of critical illness coverage including amount and extent of coverage, gender, age, health of insured, and family history.

Like most insurance plans, there are exceptions to what classifies as a critical illness. Some form of cancers or chronic illnesses may not be covered such as non-malignant tumors, cancers that haven’t attacked and infected surrounding tissues, or minor benign issues.

Additionally, a critical illness policy can be very specific on the illness that is covered. In many cases, policyholders file a claim only to find their insurance doesn’t cover the illness they are claiming.

Common reasons a critical illness claim is declined

Claiming for an uncovered condition

  • Many times, a claim can be denied because the policyholder submits a claim for a condition not covered by their critical illness plan. For example, submitting a claim for a benign tumor would most likely be denied as anything benign isn’t considered a critical illness. It’s important to thoroughly review your coverage to ensure your knowledge on what illnesses are covered.

Claiming a covered condition that does not meet the definition of a critical illness

  • Many instances of claims being denied are due to the severity of the illness. When reviewing a policy, review the details of illness severity. For example, a customer could be declined a claim for deafness if only one ear is considered “deaf”. For most policies, the policyholder would have to have permanent, irreversible loss of hearing in both ears for the claim to be accepted.

Not having necessary medical documents

  • Many insurance companies solely rely on the documentation submitted before approving a claim. In that case, there may be instances where the policyholder forgets to submit a critical document such as the doctor’s report covering the illness. In this case, a claim may be rejected or pending further investigation.
  • Medical bills are a common case of bankruptcy in America. Therefore, helping protect yourself from adverse circumstances is highly encouraged, especially if you have a family history of illnesses. Like most insurance plans, a critical illness plan can help keep you prepared for the unexpected.

Center for Disease Control, 2017