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HEALTH Insurance

Should you buy insurance to protect yourself in case of a scary diagnosis?

cancer insurance

Cancer is the second-leading cause of death in America, right behind heart disease. American Cancer Society estimated 40 out of 100 men and 39 out of 100 women in the United States will develop cancer over their lifetime.

Many of us have health insurance coverage to cover the expenses involved with diagnosing and treating cancer. But this existing coverage may not cover enough. You might still have coverage gaps that exhaust your finances. Fortunately, cancer insurance can supplement your major medical health insurance policy.

It's important to understand how cancer insurance works and how to shop for a plan. Many experts also caution that this supplemental insurance may not be necessary. Learn the facts and determine the right strategy for your needs before committing to cancer insurance.

What is cancer insurance?

Cancer insurance is a specialized form of supplemental insurance for those concerned about the possible costs associated with cancer diagnosis and treatment. It is not meant to provide standalone coverage or replace a traditional major medical health insurance plan.

Instead, it fills in the gaps that your existing health insurance coverage may not cover.

"Cancer insurance isn't the sort of health insurance you'd purchase on the Health Insurance Marketplace or obtain through an employer to cover your entire family," explains Brian Martucci, an insurance expert with Money Crashers. "It doesn't cover all your cancer-related expenses, either. But it can help make up the shortfall, especially for patients with high-deductible health plans."

Martucci notes that cancer treatment expenses can easily cost tens of thousands of dollars or more. That makes a cancer insurance policy a viable option for many.

Jesse Slome, director of the American Association for Critical Illness insurance, notes that five million Americans currently own a form of insurance coverage, including cancer insurance, which pays a cash benefit upon the diagnosis of cancer or a critical illness.

Two types of cancer insurance

There are two types of cancer insurance plans:

  • A traditional policy
  • A lump-sum cash benefit policy

Traditional policies come in two flavors:

  • An expense-incurred plan, which pays out a percentage of treatment costs up to a certain dollar ceiling. 
  • An indemnity policy, which pays a specified fixed amount for each benefit spelled out in your policy.

Either policy may cover some combination of deductibles, copays, hospital stays, treatments, procedures, tests, trips to out of network specialists, lodging and travel. That means a policy may cover up to a certain amount or percentage for surgery, chemotherapy, doctor visits, ambulance transportation, prescription medication and other associated costs.

With a lump sum plan, you receive a predetermined cash amount if you’re diagnosed with cancer. The payouts on these policies often span from $5,000 to $200,000. The higher the payout, the more expensive your premium.

Unless otherwise specified in your policy, you can use these funds for anything you want without restriction.

"A non-tobacco user can expect to secure a cancer indemnity insurance policy covering $20,000 for around $100 a year if they are male or around $165 a year if they are female. Rates, however, are set by individual insurance companies and can easily be much higher," says Slome.

You'll likely pay significantly more if you have a family or personal history of cancer or if you are older when you initiate coverage, cautions Martucci.

Insurance limitations

Be aware that cancer insurance only covers certain expenses related to cancer diagnosis and treatment.

"It won't cover expenses not directly related to cancer, including primary care insurance," adds Martucci.

Additionally, you must purchase cancer insurance before a cancer diagnosis. An insurer will likely deny you if you try to apply for a policy after being diagnosed with cancer.

Also, expect a waiting period from the time you pay for coverage and the time benefits can be paid out; if you’re diagnosed with cancer during this interval, your policy won't pay. And if you experience cancer symptoms before purchasing the plan, you may get turned down even if you get a cancer diagnosis after the waiting period expires.

"It can also be challenging if you are diagnosed with a rare form of cancer. In this scenario, it can be difficult to find specialists through an in-network policy, as doctors and specialized treatments may not be conveniently accessible," says Adriana Speach, a cancer health writer for Mesothelioma.com

"This presents new expenses, such as travel and second opinion costs from out-of-network specialists. For example, mesothelioma patients usually require a multimodal treatment plan, which would involve two types of traditional cancer treatments, such as radiation, chemotherapy or surgery,” Speach adds.

Note, too, that your primary health insurance plan may not pay for duplicate benefits offered by a cancer insurance plan due to a coordination of benefits clause. Coordination of benefits is a process that decides which insurance pays first when you have multiple policies. Check the fine print carefully for this clause.

Lucy Culp, executive director of State Government Affairs for the Leukemia & Lymphoma Society, cautions that cancer insurance coverage may ultimately disappoint.

"Consumers should be wary of any form of health coverage that isn't comprehensive, including cancer-only plans," she says. "Cancer-only coverage is not required to meet critical patient protections, which means it may not offer the robust coverage that patients undergoing cancer treatment are likely to need, such as prescription drugs and hospital stays. And it could even have a cap for how much coverage it will provide."

Good candidates for cancer insurance

Are you concerned that you may face a cancer diagnosis in your future? Have a history of cancer in your family? Cancer insurance may be right for you.

"However, it's important to read the fine print on any policy you're considering. That's because cancer insurance providers aren't prohibited from turning down applicants with pre-existing conditions, including cancer or concerning family health histories," Martucci says.

Alternatively, you may want to explore a critical illness insurance plan, which pays out a lump sum following a diagnosis of several serious conditions, including stroke, heart attack and cancer.

And if you’re already a Medicare recipient, consider a Medigap supplemental insurance policy, which may be a smarter option than cancer insurance.

How to find the best cancer insurance

Several insurance providers offer cancer insurance plans either online or at brick-and-mortar insurance agency locations. These providers include:

  • Aflac
  • Allstate
  • American Fidelity
  • Cigna
  • Colonial Life
  • Combined
  • Guardian
  • MetLife
  • Mutual of Omaha
  • Physicians Mutual
  • United Healthcare

How to buy cancer insurance online

As with any type of insurance shopping, get quotes from several different providers.

"Visit provider websites to compare prices and begin the application process," recommends Martucci. "Don't make a purchase until you've compared other types of supplemental insurance, like Medigap, and critical illness insurance."

When completing an application, prepare to answer several personal and health-related questions and provide a history of your health and medical treatment. Provide honest and accurate answers and information.

You likely won't be required to complete a physical exam to be approved for cancer insurance coverage.

Cancer insurance isn’t for everyone. However, if you’re worried about future cancer-related costs, cancer insurance coverage can offer you peace of mind.