Cancer Insurance: How It Works, What It Pays and Who Needs It

The National Cancer Institute estimates that nearly 4 in 10 people in the United States will be diagnosed with cancer at some point in their lives, and the American Cancer Society projects roughly 2 million new cases each year. Treatment is better than ever, but it often lasts months and can involve several specialists and facilities.

Even with good health coverage, a household can face costs in three places:

Every policy has its own details, but the path from application to payment follows the same pattern:

Most policies are guaranteed renewable, which means the insurer cannot cancel your coverage because your health changes, as long as you keep paying the premium.

The biggest choice you will make is how the policy pays. Here is how the two main designs compare:

Some insurers combine both designs in one policy. Benefits and limits vary by carrier and state.

A lump-sum policy is simpler and puts money in your hands quickly. A scheduled-benefit policy can pay more in total over a long treatment, but only as treatment happens. Many people pair a modest lump sum with a hospital or treatment rider to get some of both.

Cancer policies use a handful of terms that make a big difference when it is time to file a claim:

A simple way to choose a benefit amount is to add up what a diagnosis could cost your household in the first year. Here is an example for one family:

Example only. Your costs depend on your health plan, income, family and location.

In this example, a $20,000 lump sum would cover the gap. If your budget is tight, a smaller benefit still helps, and you can add coverage later while you are healthy.

You can get cancer coverage on your own or through work. Each has trade-offs:

If you already have group coverage, an individual policy can add protection that follows you from job to job and into retirement.

Cancer insurance makes the most sense when a diagnosis would put real pressure on your finances. It may be a strong fit if any of these describe you:

It may be less important if you have large emergency savings, generous paid leave and low out-of-pocket costs on your health plan. Either way, the decision is easier to make while you are healthy, because a diagnosis usually rules out new coverage.