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 a cancer policy cover?
Cancer insurance covers 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.
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.
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?
What your cancer insurance policy doesn't cover depends on the type of coverage you buy:
- Some cancer insurance policies only cover cancer diagnosis and treatment expenses
- Lump sum plans have no limitations on how you use the money
- Neither type will cover cancer that was diagnosed before you bought the policy
When doesn't cancer insurance pay out?
There are rate situations where a cancer insurance policy won't pay out:
- If you are diagnosed with cancer during a waiting period required by the policy
- If you experienced cancer symptoms before purchasing the plan and didn't disclose them
- If your diagnosis doesn't qualify based on the specifics of your policy
- For any expenses that are covered by your health insurance plan. 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?
Cancer insurance is a good choice for anyone at a heightened risk of a cancer diagnosis due to a family history or environmental risks. 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
Silver plans provide a good balance of monthly premiums with out-of-pocket costs. Coinsurance is 70% with a silver plan, meaning you will pay 30% of the costs after your deductible is met, up to the out-of-pocket limit. Silver plans are a good choice for people who are in generally good health but don't want high out-of-pocket costs if something goes wrong. Bronze plans are a popular choice with those who value low monthly premiums and are willing to pay more when they need care. Coinsurance is set at 60%, meaning you will pay 40% if you do need care, up to the out-of-pocket limit. Bronze plans are good for those who don't expect to need many services outside of preventative care throughout the year.
ACA platinum plans have the highest monthly premiums, but the lowest out-of-pocket costs. You'll pay more monthly in return for lower deductibles, copays and coinsurance amounts. Coinsurance with platinum plans is 90%, which means you pay 10% after the deductible, up to your out-of-pocket limit. Platinum plans are good for those who anticipate a lot of medical needs throughout the year.
Gold plans cost a little less than platinum plans, and come with higher out-of-pocket costs. The coinsurance amount on a gold plan is 80%, which means you pay 20% after the deductible, up to your out-of-pocket limit. A gold plan is a good idea if you think you'll need a lot of care throughout the year, but don't want to pay platinum premiums.Health insurance finder tool
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Medicare
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Employer-sponsored health insurance
Preferred-provider Organization (PPOs)
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.
Find out more about the differences between plansHealth maintenance organization (HMO)
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.
Find out more about the differences between plansHigh-deductible health plans (HDHPs)
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.
Find out more about the differences between plansExclusive provider organization (EPO)
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.
Find out more about the differences between plans
Learn more about individual insurance plans
Know more individual insurance / ACA 
Know more individual insurance / ACA 
Can you buy cancer insurance online?
Some carriers allow you to purchase a cancer insurance policy online, but some will only provide quotes online and then complete the process over the phone. As with any type of insurance shopping, get cancer insurance 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.
In most cases, a physical exam is not required to be approved for cancer insurance coverage.
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