Merritt Personal Lines Manual: Cancer Policies
Cancer insurance is sometimes referred to as a limited risk policy or the even older name dread disease policy. The names reflect the basic truth of the coverage: It only provides benefits for a single category of health risks -- cancer.
Generally, this type of policy provides a daily benefit or indemnity (such as $50, $75, $100, etc.) if you or a family member is hospitalized for cancer or is receiving regular cancer treatment on either an inpatient or outpatient basis. However, a specific insurance company or particular policy may limit coverage even more steeply. In this case, daily benefits may be provided only for inpatient treatment of cancer with outpatient expenses excluded.
If you have a cancer policy and are hospitalized for cancer-related treatment or surgery, over and above any other benefits, the policy will indemnify you at a specified amount ($100 per day is common) for as long as the treatment or hospital confinement continues.
Of course, if you're hospitalized due to a broken leg, the cancer policy will pay nothing.
Cancer policies do contain limitations in terms of both the daily benefit, a policy maximum or a time limitation. For example, a plan may pay $100 per day for up to 30 days of confinement, 90 days of treatment, etc.
A basic medical expense policy or major medical plan will cover cancer like any other illness would be covered -- on an expense-incurred basis. The cancer policy indemnifies you on a daily basis without regard to actual expenses incurred.
If you have hospitalization insurance do you need an additional policy for cancer insurance? The answer depends upon your ability to pay extra premium, awareness of the risk of cancer, etc. Because cancer is one of the leading causes of death, most people are aware of its risks and costs. However, this awareness may not create any urgency for "extra protection" by means of a cancer policy.
For example, almost everyone is aware of the relationship between smoking and lung cancer; yet, hundreds of thousands continue to smoke because they don't care or don't believe the cancer will happen to them. Or, even more unfortunately, they simply can't quit.
Do smokers buy cancer insurance? Probably not. Before they issue a policy, most insurance companies that write cancer coverage will ask you if you smoke. If you answer "yes," the premiums are very high.
In most other cases, the premiums for cancer insurance are relatively low -- just a few dollars in annual premium per thousand dollars of coverage for a healthy person in his or her thirties.
So, why don't more people buy the insurance? Several reasons stand out. First, many people don't see a reason to buy extra coverage when they already have regular health insurance. Second, most consumers don't like to think about their health in terms of contracting specific, deadly diseases. Third, most insurance companies would rather focus on broad coverages sold to large audiences...they don't encourage their agents to sell specialty policies.
Of course, a particular person may be more aware of cancer's effects, due to his or her own experience -- the loss of a loved one to the disease or a family history. This person will probably be more inclined to buy the extra protection.
Buying cancer insurance is a choice that you will have to base on your own specific needs and motivations. The coverage often will duplicate what you are paying for in your comprehensive medical plan. Be sure you understand the limitations and exclusions -- and whether or not you have any real need for this coverage -- before you buy the policy.
