Supplemental plans are designed to fill gaps in major medical policies. As heathcare and insurance costs continue to increase it is quite common for policy owners to increase their plan deductibles. Eventually the plan turns into a ‘catastrophic’ plan to cover hospital visits and Copays (if part of the plan) for doctor visits. This leaves a gap in coverage that can be addressed by supplemental plans. Generally supplemental plans are divided into two main categories, Accident and Critical Illness.

Accident plans are triggered when medical expenses are incurred due to an injury caused by an accident.  As a supplemental plan, they have a capped benefit, usually in the $5000 to $15,000 range. Depending on the plan, they either fill in the deductible and co-insurance exposure of the major medical plan. This type of plan “coordinates benefits” with the major medical plan.

The other plan pays directly to you for the cost of the treatment up to the accident plan maximum benefit. Your major medical plan will cover the plan depending on whether the deductible has been met. The accident plan will pay out the cost of treatment up to the plan limit directly to you. Since this type of plan does not “pay attention” to how your major medical plan addresses the accident coverage, it is said to not coordinate benefits.

Who should consider accident plans?

Critical Illness plans are sometimes referred to Life Insurance for the living.  The “problem” CI plans address is the fact that the medical profession does a much better job of successfully treating the condition.  The problem is, the process of treatment and recovering from a CI inludes many expenses  that aren’t covered by major medical.  Where does the money come from?  Hence out families don’t need life  cover, at a minimum, the 3 main categories of heart attack, cancer and stroke.  How do they benefit the owner?  They pay out an agreed upon lump sum in the unfortunate event a qualifying critical illness is diagnosed.  This tax free lump sum can be spent by the client any way he chooses.  Examples include in-home nursing care or 2nd opinions at the Mayo Clinic .

Most plans cover additional areas that may include Advanced Alzheimer’s, coma, end-stage renal failure, major burns, major organ transplants and paralysis.  Typical benefits for the simplified issue policies are in the $5000 to $50,000 range.  Fully underwritten policies can be as high as $250,000.

More than accident plans, these plans truly provide a safety net when a critical illness is diagnosed.  Perhaps a 2nd opinion is needed, or experimental treatment is considered or in-home nursing care is required not to mention the spouse working less or having the freedom to leave his/her job to care for the illness.  Critical Illness benefits provide the wherewithall in a time of stress to make these goals reachable while reducing the financial strain on the family.