As many Americans know, a serious illness or injury can have quite an impact on their financial well-being, even with a generous major medical insurance plan. Think high deductibles and co-pays, limited paid time off, and child-care costs in an environment where many Americans are strapped with student debt, high housing costs, and other bills that make it difficult to save. Add in a global pandemic and those costs can become serious financial hardships.
Fortunately, supplemental benefits offered by life insurers provide consumers with an affordable way to help protect against such financial hardships. These policies are designed to help protect household budgets when there’s a significant medical event.
Supplemental benefits include payments directly to consumers to use at their discretion. For example, one might use the benefit to pay household expenses. Or they can be used for deductibles and co-insurance, which can be significant during a major illness.
In some cases, these benefits are paid in a lump sum. In other cases, they are paid on a “per service” basis, and amounts may differ depending on the severity of an accident or illness and related costs. However structured, consumers decide how to use the benefits received.
Different supplemental policies cover different things. For example, critical illness coverage pays in the event of a diagnosis of a serious ailment. Hospital indemnity benefits are triggered by hospitalizations, outpatient services, and some physician visits. Unlike primary medical insurance, supplemental benefits are “in addition to” and not “in place of” major medical coverage.
Sadly, because of the economic upheaval spawned by the COVID-19 pandemic, many consumers will find it harder to maintain savings and protect their finances in the face of serious medical events. Consumers with supplemental coverage enjoy added protection from medical-related debt and from having to make difficult choices such as dipping into a college fund or missing a mortgage payment in order to pay medical bills. This financial protection will become even more crucial as consumers continue to feel the effect of the pandemic on their wallets and savings.
Rikki Pelta is Counsel at the American Council of Life Insurers (ACLI). She is responsible for supplemental benefits, paid family & medical leave, and market conduct. She joined ACLI in 2018
