You have probably never heard of critical illness insurance, a simple and fairly priced supplementary health coverage that may be a financial lifesaver in the event you are diagnosed with one of the “big three” — cancer, heart attack or stroke.

First, the coverage is comparatively new to the U.S. market; the first policy was sold in 1996 and merely 600,000 Americans are currently covered, according to the American Association for Critical Illness Insurance, or AACII. Second, it’s sold by brokers and agents who are more focused on selling their bread and butter product, life insurance.

“The No. 1 problem is nobody has ever heard of this protection,” says Jesse Slome, executive director of the American Association for Critical Illness Insurance. “In that regard, it is very much like long-term care insurance.”

Just as long-term care comprehended the new reality that Americans were living more, critical illness insurance admits that we’re far more inclined to survive stroke, cancer or a heart attack now than we were just a few years back. For example, of the 1.4 million Americans who’ll be diagnosed with cancer this year, girls have a 63 percent chance of living at least five years and men a 66 percent chance, according to AACII figures.

“The great news is you’re likely to reside,” says Slome. “The bad news is you are likely to be broke.”

Do you really want ‘CI’ coverage?
Critical illness, or CI, insurance is designed to help cover the medical expenses your health insurance won’t cover, such as deductibles, copays, noncovered prescription drugs, alternative treatments and out of town care, as well as nonmedical expenses, including mortgage or rent, utilities, car payments and insurance, health insurance premiums and lost income.

“If you are 30 years old, married with kids and you get cancer, the first thing that is going to happen is, you will take time off from work,” says Slome. “Some of that is compensated, some won’t be. As well as your spouse will likely take some time off to help compensate. So it’s not only losing one income; it impacts the entire family.”

It can make up for the shortcomings of your company-sponsored disability coverage, which generally covers 60 percent of your income and might not kick in if your treatments let you go back to work.

CI coverage pays your complete benefit amount in one lump-sum payment if you’re diagnosed with a critical illness covered by the policy should you make a full recovery. Some coverages will even pay you multiple times. If you have a heart attack for instance, you had get one payout for a cancer diagnosis, then a second, albeit reduced payment.

With proper preparation, critical insurance can help people resist a lengthy treatment and recovery interval without digging themselves deep into debt. It also can help pay for lifesaving treatment that needs temporary relocation, for example awaiting an organ transplant.

Prices and factors
How much might you need? As a starting point, Ken Smith, manager of merchandise sales at Assurity Life Insurance, recommends multiplying your own monthly mortgage payment by 24, or two years, and adding $5,000 for expenses not covered by your health insurance. By way of example, in case your mortgage is $1,500 per month, your policy benefit amount would be $41,000. Policy limitations can range from $10,000 to $1 million.

As for costs, rates may depend on gender, your actual age, use of tobacco products, health and also the coverage amount. Tobacco users can expect to pay about double.

Critical illness insurance is available as individual coverage, through an employer’s group plan and even as a rider on some life insurance coverages. Slome says CI policy rates are often guaranteed for three years and, while not tax deductible for individuals, are paid tax free to receivers. Exam, he isn’t required by policies with face values of less than $50,000 generally don’t says.

CI policies contain strict definitions of what does and will not make up critical illness, so do not expect to gather on a diagnosis of chest pain or straightforward skin cancer.