Supplemental critical illness insurance policies have lists of specific conditions for which benefits can be paid. The policies have varying benefit amounts, and can pay benefits as a lump sum, a monthly amount, or on a per-treatment basis. You might also see lump-sum critical illness policies that offer optional add-on riders for additional monthly and/or per-treatment benefit amounts.

If you’re diagnosed with a covered medical condition, you’ll receive cash benefits as specified by the policy. The benefits are paid directly to you, and you can use the money however you like: To pay out-of-pocket medical bills (deductible, copays, coinsurance), other living expenses, or both.

The answer will depend on your circumstances. If you have robust major medical coverage and disability insurance, and enough money in savings to cover your medical bills and other expenses while dealing with a critical illness, you might not need additional coverage.

But if your major medical insurance has high out-of-pocket costs, a critical illness policy might be a great addition to your overall coverage. Even with a robust health plan, a critical illness supplement might be a good addition if the non-medical costs of a serious medical condition (such as missed work, child care and mortgage payments) would be difficult to manage.

This varies from one policy to another, but all critical illness policies have a specific list of conditions for which they’ll pay benefits. Some policies cover only several basic conditions, while others cover dozens.

Most critical illness policies cover conditions such as heart attack, stroke, organ failure/transplant, and internal cancers (some plans have a partial benefit available for skin cancer). Some policies also provide coverage for severe burns, paralysis, coma, coronary bypass surgery, end-stage renal disease (kidney failure), or significant neurodegenerative conditions such as MS, ALS, or Parkinson’s disease.

Policies differ in terms of whether they provide benefits for recurrence of a condition for which benefits have already been paid.

Weigh premiums vs benefits

Critical illness plans with low premiums tend to have lower benefit amounts and/or a more limited list of covered medical conditions. Plans with higher premiums might pay more when you have a claim, or cover a more extensive list of illnesses. You’ll want to find a good balance between how much the plan costs and what benefits it will provide.

Consider your primary health coverage

A critical illness supplement might be a great choice, but you’ll also want to consider whether you’d be better off putting that money toward a more robust major medical health plan. If you’re confident in your primary coverage and you can afford to also buy a supplemental plan, a critical illness plan can be a great addition to your coverage.

Expected medical care

Most critical illness plans are medically underwritten, which generally means they won’t cover your own pre-existing conditions. But maybe you have a family history of cancer or heart disease or another serious condition. If so, supplemental critical illness insurance might bring you some extra peace of mind.

If you’re buying your own individual/family critical illness policy, you’ll need to meet whatever underwriting guidelines the insurance company uses. In general, applications for these policies will ask a handful of medical history questions to determine eligibility, and will not cover people with certain pre-existing medical conditions. They also tend to impose upper age limits, and won’t issue policies to people above a certain age, typically somewhere between 60 and 70 years old.

To enroll in your employer’s group critical illness policy, you have to sign up during open enrollment and be actively working in order to maintain coverage (some plans have portability provisions that allow the policyholder to keep their coverage if they leave the employer). Group policies are generally guaranteed issue, regardless of medical history. But they can still exclude pre-existing conditions and impose waiting periods. And benefits can be reduced once an employee reaches a certain age.

The cost of a critical illness policy will depend on whether you buy it yourself or get it from your employer, how old you are, your gender, whether you use tobacco, the insurance company you choose, and the specific benefits of the policy (covered conditions and payout amounts).

In general, the older you are and the more robust the benefits, the higher the monthly cost will be. A person in their 20s might find that they can purchase basic critical illness coverage for just a few dollars a month and quite robust coverage for under $50/month. But a person in their late 50s might find that $50/month only buys them a minimal amount of basic critical illness coverage.

Most insurers that offer critical illness policies will give you the option to pick your benefit amount: It’s common to see these range from $5,000 to $75,000 or more. And you may also have the option to add various riders that will provide additional benefits.

Yes. In order to contribute to a health savings account (HSA), your only major medical health coverage must be an HSA-qualified high-deductible health plan (HDHP).

But the IRS does allow people with HDHPs to contribute to an HSA even if they also have various types of supplemental coverage, including coverage for “a specific disease or illness.” So a critical illness policy that includes a list of specific covered conditions will not affect a person’s eligibility to contribute to an HSA.

Critical illness policies are not regulated by the Affordable Care Act (ACA). So insurers that offer these plans can exclude pre-existing medical conditions or reject an applicant based on medical history. They also impose waiting periods before benefits can be paid for a new medical condition. And critical illness plans have specific caps on the benefits they’ll pay, regardless of how high your medical bills might be.

Major medical health insurance, on the other hand, has to be fully compliant with the ACA if it was issued in 2014 or later. These plans cannot have annual or lifetime benefit maximums, waiting periods, or pre-existing condition exclusions. And if they’re issued in the individual/family or small group market, they must cover the essential health benefits. This includes services for virtually all medical conditions, as opposed to just a list of specific conditions.