Critical illness rider: What it is, how it works, is it worth it?

A critical illness insurance rider is a policy add-on that pays out financial benefits while you’re alive to cover treatment for certain illnesses specified in your life insurance policy.

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Tory CrowleyTory CrowleyAssociate Editor & Licensed Life Insurance ExpertTory Crowley is an associate editor and a licensed insurance expert at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

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Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

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Critical illness insurance riders pay out financial benefits while you’re alive to cover treatment for certain illnesses that are specified in your life insurance policy. The illnesses covered under this add-on could include heart attack, cancer, stroke, kidney failure, ALS, and other critical conditions that could limit your life expectancy and leave you with expensive medical bills.

The money for the rider payout is taken from the death benefit of your insurance policy and is disbursed to you as a tax-free lump sum. When you die, your beneficiaries will receive the remainder of the death benefit.

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What is a critical illness rider?

The critical illness rider is an add-on to an insurance policy that can help you financially if you’re diagnosed with a critical illness like cancer, stroke, or a heart attack. 

Critical illness riders are not always automatically included as a benefit provided by a life insurance policy. Some insurance companies add the rider automatically while others will allow you to add it at an additional cost.

You should consider adding a critical illness rider to your life insurance if being diagnosed with a critical illness would put you in a position where you would prefer to have the option to pull cash from your policy’s death benefit while you’re still alive

What does a critical illness rider cover?

Technically, you can use the money from the death benefit however you want, but most people use these funds to cover medical bills or to replace a lost income if you have to stop working due to your illness. 

The rider can be activated if you’re diagnosed with a qualifying medical condition, which often includes: 

How does the critical illness rider work?

If you’re diagnosed with a qualifying illness, you’ll be eligible to redeem the advanced financial benefit. The exact terms of the benefit will be written out in the rider of your insurance policy.

You’ll be paid a predetermined portion of the death benefit of your life insurance policy if you meet the criteria to exercise the rider. 

To do so, you’ll need to file a claim with your insurance company and provide the medical paperwork to prove you meet the necessary conditions to claim the rider. 

Once approved, the insurer will send you a lump sum, tax-free payment in the form of a check for the benefit amount.

Can you get life insurance if you have a critical illness?

If you have a critical illness, you can still get life insurance coverage. The complexity and type of condition you have will determine the type of insurance and rates you’ll be eligible for. Discussing your options with a licensed agent is the best way to determine what insurance coverage will meet your needs.

Who is eligible for a critical illness rider?

Most people are eligible for a critical illness rider, but it really depends on the insurance company. Not every insurer offers the critical illness rider. If this policy add-on is something you’re considering, make sure you share that with your licensed agent so they can make sure you’re applying with a company who can offer it to you. 

Are there exclusions to a critical illness rider?

If you have a pre-existing condition, you won’t be eligible to exercise the rider for that condition.

For example, if you have a history of breast cancer, you would still be eligible to add the rider to your policy, but would need a different qualifying event — like a stroke or heart attack — to take advantage of the rider. You wouldn’t be able to exercise the rider if you were diagnosed with breast cancer. 

Having a family history of an illness won’t prevent you from adding the rider to your policy.  

What types of policies offer a critical illness rider?

All types of life insurance will allow you to add a critical illness rider, including term, permanent, variable or universal policies.

Some insurance companies will include a critical illness rider automatically in your policy, while others will allow you to add the rider for an additional fee. Talk with a licensed agent to learn more about the cost of adding the rider to your policy.

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What’s the difference between critical illness insurance and a critical illness rider?

Critical illness insurance is a standalone policy that exists exclusively to provide financial assistance to you in case you’re diagnosed with a qualifying critical illness. The only way you’ll claim a benefit for this type of policy is if you’re diagnosed with a qualifying critical illness when the policy is active. 

A critical illness rider provides the same function, but exists as an add-on to a life insurance policy. If you’re never diagnosed with a critical illness, you’ll still be able to receive the death benefit in full when you die. 

It’s much cheaper to add a critical illness rider to a life insurance policy than getting a separate critical illness policy, but you must add the rider when you get the policy. You can’t add the rider to an existing policy. 

What’s the difference between a critical illness rider and a long-term care rider?

A long-term care rider is similar to a critical illness rider in that it’s a policy add-on that can give you financial benefits from your life insurance while you’re still living.

To redeem the rider benefit, you must be unable to independently perform two of the six activities of daily living either temporarily or permanently. These activities include eating, bathing, getting dressed, walking or getting from one place to another, using the toilet, and maintaining bowel and bladder continence. [1]  

Much like the critical illness rider, once you meet the specified criteria, you’re able to make a claim for a predetermined portion of the benefit amount.

What’s the difference between a critical illness rider and an accelerated death benefit rider?

A critical illness rider and an accelerated death benefit rider both allow you to claim a portion of the death benefit while you’re still living if you meet certain criteria. However, the qualifying events needed to exercise each of these riders are different. 

  • For the critical illness rider, you need to be diagnosed with an approved illness, but it doesn’t need to be terminal. 

  • For the accelerated death benefit rider, you need to be diagnosed with a terminal illness and be given less than 12-24 months to live. 

The specifics of these riders will vary between insurance companies and will be clearly outlined in your policy documents.

Best life insurance companies for a critical illness rider

Foresters Financial

Policygenius rating 

Our proprietary rating methodology takes multiple factors into account, including customer satisfaction, cost, financial strength, and policy offerings. See the "methodology" section for more details.

Full orange starFull orange starFull orange starFull orange starHalf orange star

4.4

AM Best rating 

A.M. Best is a global credit rating agency that scores the financial strength of insurance companies on a scale from A++ (Superior) to D (Poor).

A

Cost 

Using a mix of internal and external rate data, we grade the cost of each insurance company's premiums on a scale from least expensive ($) to most expensive ($$$$$).

$

$

$

$

$

No-med-exam option

Why we chose it

For people under age 55 and in relatively decent health, Foresters Financial's Your Term policy is a solid choice for a term life policy. You can get it without a medical exam and coverage can be offered within 24 hours.

Pros and cons

Pros

  • Accelerated death benefit rider includes coverage for critical, chronic, and terminal illnesses

  • Includes several no-cost riders that aren’t available through other insurers, including Family Health Benefit Rider and Charity Benefit Provision

  • No-medical-exam option available for people up to age 55

Cons

  • Not available in New York or Maine

  • People with complicated health histories will likely find their best rates elsewhere

Foresters Financial includes a critical illness rider with their term life insurance policy at no additional cost. It also allows you to use the rider for many health conditions. 

The rider covers life-threatening cancers, stroke, myocardial infarction, ALS, advanced Alzheimer's disease, renal failure, and major organ failure.

Transamerica

Policygenius rating 

Our proprietary rating methodology takes multiple factors into account, including customer satisfaction, cost, financial strength, and policy offerings. See the "methodology" section for more details.

Full orange starFull orange starFull orange starFull orange starHalf orange star

4.6

AM Best rating 

A.M. Best is a global credit rating agency that scores the financial strength of insurance companies on a scale from A++ (Superior) to D (Poor).

A

Cost 

Using a mix of internal and external rate data, we grade the cost of each insurance company's premiums on a scale from least expensive ($) to most expensive ($$$$$).

$

$

$

$

$

No-med-exam option

Why we chose it

Transamerica is one of the oldest and largest life insurance companies, with over 12 million active accounts today. It offers affordable rates for almost every age, and you can even skip the medical exam if you fall under a certain age or coverage amount.

Pros and cons

Pros

  • Competitive rates for term life insurance

  • No-medical-exam available for qualifying applicants, including smokers and people between 60 and 70, which is rare

  • One of the fastest turnaround times in the industry for traditionally underwritten term policies

Cons

  • Term life not available in New York

  • Not a good option for people with a history of cancer, alcohol abuse, or asthma

Transamerica offers a living benefits option that includes a critical illness rider at no additional cost. You may redeem up to 90% of the death benefit of your policy if you’re confirmed by a doctor to have suffered a heart attack, stroke, or cancer. 

Methodology: How we chose the best life insurance companies of 2023 for a critical illness rider

We don't get paid for our company reviews and use an extensive rubric of criteria covering policy details, price, financial confidence, third-party ratings, and customer experience to assign unbiased ratings out of five stars. Any recommendations we make are based on internal and external expert opinions and data from our Policygenius Price Index, which uses real-time rate data from leading life insurance companies to determine pricing trends.

Our ratings and reviews can help point you to an insurer you can rely on for your family’s financial protection, but the best life insurance company for you is dependent on multiple factors. A licensed agent at Policygenius can work with you through the application process so you’re getting coverage from the best insurer for your circumstances at the most competitive price.

→ Read more about our reviews methodology here

How to pick a critical or chronic illness rider

If you’re considering adding a critical or chronic illness rider, it comes down to financial need. Different events allow you to utilize each rider and claim an advanced death benefit.

For the critical illness rider, you just need to be diagnosed with a qualifying illness whereas for the chronic illness rider, you need to be unable to perform two of the six functions of daily living.

For different people, each of those scenarios would warrant a greater financial need. If you would benefit from being able to withdraw cash from your insurance policy’s death benefit in either case, consider adding the respective rider.

How to get life insurance with a critical illness rider

Getting life insurance with a critical illness rider isn’t much different than getting any life insurance policy

  1. Connect with a licensed agent to compare rates, pick an insurance provider, and apply for coverage

  2. Make sure to tell your insurance agent that you want to consider adding a critical illness rider. They’ll make sure to discuss all of your options with you, including costs.

  3. Once your policy is in force and you begin paying your premiums, if you’re diagnosed with a qualifying critical illness, you’ll file a claim. 

  4. Once the insurance company verifies that the claim you submitted is in alignment with your insurance policy and the rider, they’ll send you a check for the agreed upon amount. This amount will be deducted from your total death benefit that your beneficiary will receive when you die. 

Is a critical illness rider worth it?

Adding a critical illness rider may not be worth it for everyone. Some policies include the rider at no extra cost, while others charge additional premiums. Keep in mind that the rider doesn’t provide you with an additional benefit, but only allows you to withdraw funds from your life insurance policy’s death benefit in case of an eligible critical illness.

Using the critical illness rider ultimately means there will be less money for you to leave to your beneficiaries. Speak with a licensed agent to ensure that your family’s financial needs will be met with the insurance policy and any riders that you choose.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. National Library of Medicine

    . "

    Activities of Daily Living

    ." Accessed January 25, 2023.

Author

Tory Crowley is an associate editor and a licensed insurance expert at Policygenius. Previously, she worked directly with clients at Policygenius, advising nearly 3,000 of them on life insurance options. She has also worked at the Daily News and various nonprofit organizations.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

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