How does cancer insurance work?

Cancer insurance is a specialized form of supplemental insurance. It’s not meant to provide standalone coverage or replace a traditional major medical health insurance plan.

"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."

Cancer treatment can easily cost tens of thousands of dollars or more. Cancer patients may also face lost wages and other expenses during treatment. With a lump sum policy, you can use the benefit to cover any expense you want.

Jesse Slome, director of the American Association for Critical Illness Insurance, says that five million Americans currently have a supplemental policy like cancer insurance that pays a cash benefit upon the diagnosis of cancer or a critical illness.

What does cancer insurance cover?

There are two types of cancer insurance plans:

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

Traditional policies come in two types:

  • An expense-incurred plan pays out a percentage of treatment costs up to a specific limit.
  • 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. A policy may cover up to a certain amount or percentage for surgery, chemotherapy, doctor visits, ambulance transportation, prescription medication and other associated costs.

Lump sum plans pay 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.

"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," Slome says.

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.

What isn't covered by cancer insurance?

Some cancer insurance policies only cover cancer diagnosis and treatment expenses. Lump sum plans, however, have no limitations on how you use the money.

Additionally, you must purchase cancer insurance before the diagnosis.

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 says.

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 (COB) 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, says that cancer insurance coverage is limited.

"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."

Who should buy cancer insurance?

Are you concerned that you may face a cancer diagnosis in the future? Have a history of cancer in your family? Cancer insurance may be right for you. You won’t be able to get coverage after a diagnosis, so if you feel like the risk is high, it’s best to look into it now.

"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.

Which companies offer cancer insurance?

Several insurance providers offer cancer insurance plans online or at insurance agency locations. These providers include:

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

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COBRA

Consolidated Omnibus Budget Reconciliation Act
People who lose their employer-sponsored health insurance may qualify for a COBRA plan. COBRA lets you keep your former employer's health plan, but you're responsible for paying all of the costs, including your former employer's portion.
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Medicare

People who are 65 and over qualify for Medicare. You can choose Original Medicare (also called Parts A and B), which is offered by the federal government, or Medicare Advantage (also called Part C), which private insurers provide. The average annual premium for Original Medicare is about $1,600. Medicare Advantage's average yearly premium is $336, but you may have higher out-of-pocket costs than Original Medicare.
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Medicaid

Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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Parent's employer-based health insurance

The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Spouse's employer-based health insurance

Most employers allow employees to add spouses to their health insurance. Going from single health coverage to a family plan may triple or quadruple your premiums. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447. Not all jobs allow for spouse's coverage, so you'll want to check with your employer to make sure it's an option.
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Employer-based health insurance

Most people with private health insurance get their coverage through a job. employer-sponsored health insurance is usually cheaper than individual health insurance unless you qualify for Affordable Care Act subsidies. Job-based plans are generally less expensive because businesses often pick up more than half of employer-sponsored health insurance premiums. Kaiser Family Foundation estimates the average premiums for a single coverage employer-sponsored health plan is $1,186 and the average family plan is $5,447 annually.
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Employer plans are often one of these types of four plans. Click on each one to find out more.
  • PPO
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Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
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Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
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Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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People who would prefer to pay lower premiums with a higher deductible may want the below plans
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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People who would prefer to pay higher premiums with a lower deductible may want the below plans
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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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," Martucci says. "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.