Cancer Insurance

[Caduceus]

I know all the typical arguments against buying cancer /dread disease insurance but I was reading through a policy document offered to my fiance and it seems like a good deal, so I wanted to know what you folks thought. It might be something offered specifically to high level executives.

Premium is $250 a year, and coverage is for $300,000 and will pay out upon any diagnosis of cancer, no matter how minor. They will pay out even if it's something like, say, skin cancer found through a mole that's easily removed. The coverage is capped at $300,000. Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.

250 / 300,000 = 0.083%

I might be wrong, but the chances that anyone will get cancer in any given year must surely exceed that percentage by a fair amount. So, acturially speaking, would it be rational to purchase this?

The way I look at it is that at some price, insuring against a risk is reasonable. So, I would certainly buy coverage for $300,000 for $1. I would almost certainly buy it for $10 a year. I am curious how to go about thinking about the pricing of this risk and I don't quite understand how they can offer coverage at this price. It seems mispriced and the insurance company seems certain to lose over time.

[RudyS]

What is the "payout"? Is it in addition to medical expenses that are already covered by medical insurance? Or is it considered secondary coverage to your primary health insurance?

[Caduceus]

What is the "payout"? Is it in addition to medical expenses that are already covered by medical insurance? Or is it considered secondary coverage to your primary health insurance?

Yes, it is completely separate cover. The policy wording is very straightforward and simple. It will pay out upon cancer diagnosis at any stage. It specifically allows the sum to be claimed even if the person assured is covered under other policies.

Basically, the sum is paid if he gets cancer. It's as simple as that. I think it's only offered as part of a package to some people at his firm, although I can't be sure.

The premiums are not level. I was looking at the premium table and a 65 year old person would pay $6,000 for $300,000 of coverage. But for the next ten years of his life, we are looking at $250 - $400 for $300,000 of coverage. This is pure term insurance - guaranteed renewable for him but he has no obligation to continue.

[dm200]

I know all the typical arguments against buying cancer /dread disease insurance but I was reading through a policy document and it seems like a good deal, so I wanted to know what you folks thought.
Premium is $250 a year, and coverage is for $300,000 and will pay out upon any diagnosis of cancer, no matter how minor. They will pay out even if it's something like, say, skin cancer found through a mole that's easily removed. The coverage is capped at $300,000. Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.
250 / 300,000 = 0.083%
I might be wrong, but the chances that anyone will get cancer in any given year must surely exceed that percentage by a fair amount. So, acturially speaking, would it be rational to purchase this?
The way I look at it is that at some price, insuring against a risk is reasonable. So, I would certainly buy coverage for $300,000 for $1. I would almost certainly buy it for $10 a year. I am curious how to go about thinking about the pricing of this risk.

How is the amount you receive (up to $300,000) actually determined? Is it related to your cost of treatment? Can you collect more than you have to pay for treatment? If your health insurance pays 100% for your treatment, can you collect anything?

Over 30 years ago, I had Thyroid cancer - only diagnosed as cancer during/after neck surgery done when I had a "nodule" on my thyroid. I cannot recall all the financial details, but I don't think I had to pay very much "out of pocket" for the surgery, days in the hospital, etc.

From your cited numbers, if it paid out a lot for any/every cancer diagnosis - it would lose money for the insurance company.

An insurance company would never willingly offer a policy that is actuarialy beneficial to the insured party.

[Broken Man 1999]

I have always believed insuring for a very specific health issue was not a good idea.

I also find it hard to believe a skin cancer that can be easily removed would yield a $300,000 payout. Their business model could not exist in Florida, I don't believe.

Could you share what insurance company is offering this policy?

Hopefully one of the insurance company experts will chime in. They have been a great resource for us.

Broken Man 1999

[dm200]

Yes, it is completely separate cover. The policy wording is very straightforward and simple. It will pay out upon cancer diagnosis at any stage. It specifically allows the sum to be claimed even if the person assured is covered under other policies.Basically, the sum is paid if he gets cancer. It's as simple as that. I think it's only offered as part of a package to some people at his firm, although I can't be sure.

BUT - what is the "sum paid" and how is that sum determined?

Say, for example, there is a list of types and details of the various types of cancer and how much is paid for each type. That list, then, would have the most common and least deadly types (such as most skin cancer) paying out a small sum and the rare and costly to treat types at the highest level.

Yes - skin cancer is very common. Say, for the common types of least dangerous type of skin cancer, you get $100. Maybe the common and least deadly type of thyroid cancer , you get $150 - and so on.

Hardly seems worth it to me. Take the $250 and buy more life insurance or disability insurance or put $250 a year into savings to pay for any type of medical treatment you need/want.

[Caduceus]

I know all the typical arguments against buying cancer /dread disease insurance but I was reading through a policy document and it seems like a good deal, so I wanted to know what you folks thought.
Premium is $250 a year, and coverage is for $300,000 and will pay out upon any diagnosis of cancer, no matter how minor. They will pay out even if it's something like, say, skin cancer found through a mole that's easily removed. The coverage is capped at $300,000. Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.
250 / 300,000 = 0.083%
I might be wrong, but the chances that anyone will get cancer in any given year must surely exceed that percentage by a fair amount. So, acturially speaking, would it be rational to purchase this?
The way I look at it is that at some price, insuring against a risk is reasonable. So, I would certainly buy coverage for $300,000 for $1. I would almost certainly buy it for $10 a year. I am curious how to go about thinking about the pricing of this risk.

How is the amount you receive (up to $300,000) actually determined? Is it related to your cost of treatment? Can you collect more than you have to pay for treatment? If your health insurance pays 100% for your treatment, can you collect anything?

Over 30 years ago, I had Thyroid cancer - only diagnosed as cancer during/after neck surgery done when I had a "nodule" on my thyroid. I cannot recall all the financial details, but I don't think I had to pay very much "out of pocket" for the surgery, days in the hospital, etc.

From your cited numbers, if it paid out a lot for any/every cancer diagnosis - it would lose money for the insurance company.

An insurance company would never willingly offer a policy that is actuarialy beneficial to the insured party.

No, the payout is not related to the cost of treatment. The policy language simply states that upon any diagnosis of cancer, the full amount will be paid out. This is the policy wording:

"If during the time this policy is in force, and after the requisite waiting period, you experience symptoms that are related to Cancer, and a medical professional subsequently confirms that You suffer from Cancer, we will pay the Cancer Benefit equal to the sum assured."

The only exclusion listed is for any pre-existing conditions that directly caused the cancer that the person insured should have reasonably known or be aware of. The payout is a flat payout. That's what it states, in fairly unequivocal language. It is not connected to costs incurred through medical treatment.

I agree with you that this seems mispriced and that over time the insurance company would lose a lot of money.

My guess is that perhaps the firm offering this policy is trying very hard to get clients to sign up, and that subsequent premium increases will be fairly significant and in excess of what's estimated in the current policy illustration. He can choose to opt-out at that point, so no harm done for us, but would you, given what I've described, go ahead and buy this policy? It seems pretty good.

[dm200]

I have always believed insuring for a very specific health issue was not a good idea.
Broken Man 1999

Yes - I generally agree.

To me, there may be unusual situations where the to be insured party can only get this type of insurance.

I think it also tends to be true that people greatly misjudge various health/medical risks - sometimes that a particular diagnosis is more likely than it really is OR a particular diagnosis is less likely. "Cancer" seems to frighten a lot of people very much.

[BogleMelon]

The policy wording is very straightforward and simple.

If you haven't bought yet, where did you see the policy wording? One must read the fine print of a draft policy before being so sure that there is an insurance product that is "Very straightforward"!

[Caduceus]

I have always believed insuring for a very specific health issue was not a good idea.
Broken Man 1999

Yes - I generally agree.

To me, there may be unusual situations where the to be insured party can only get this type of insurance.

I think it also tends to be true that people greatly misjudge various health/medical risks - sometimes that a particular diagnosis is more likely than it really is OR a particular diagnosis is less likely. "Cancer" seems to frighten a lot of people very much.

I know these arguments, but I'm not looking to re-hash the arguments in abstract. I would never have thought of buying something like this until it was offered to my fiance at this particular price.

[Caduceus]

The policy wording is very straightforward and simple.

If you haven't bought yet, where did you see the policy wording? One must read the fine print of a draft policy before being so sure that there is an insurance product that is "Very straightforward"!

The policy wording was provided together with the application form. I've read many more complicated applications than this trying to sort out some ridiculous life policies my relatives and friends had bought. This is a short, 12-page document in very straightforward language. To be honest, I was impressed.

[Watty]

Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.

That could be a loophole that you could drive semi-truck through.

Pretty much everyone has lumps that a doctor may have noted and dismissed as not being a problem.

[dm200]

No, the payout is not related to the cost of treatment. The policy language simply states that upon any diagnosis of cancer, the full amount will be paid out. This is the policy wording:
"If during the time this policy is in force, and after the requisite waiting period, you experience symptoms that are related to Cancer, and a medical professional subsequently confirms that You suffer from Cancer, we will pay the Cancer Benefit equal to the sum assured."
The only exclusion listed is for any pre-existing conditions that directly caused the cancer that the person insured should have reasonably known or be aware of. The payout is a flat payout. That's what it states, in fairly unequivocal language.
I agree with you that this seems mispriced and that over time the insurance company would lose a lot of money.
My guess is that perhaps the firm offering this policy is trying very hard to get clients to sign up, and that subsequent premium increases will be fairly significant and in excess of what's estimated in the current policy illustration. He can choose to opt-out at that point, so no harm done for us, but would you, given what I've described, go ahead and buy this policy? It seems pretty good.

I don't know. This seems to be so wildly absurd that there must be "more to the story". I believe all sch insurance policies must be approved for sale by the applicable state insurance regulatory department/agency. Perhaps contacting them might provide insight.

Often, with insurance policies, a key is the definition of terms. is there a definition of the word "Cancer"? How about "symptoms"?

How could such a policy charge $250 a year - and pay me $300,000 if I have a skin cancer develop on my left ear?

[dm200]

Let us know if/when you find out, definitively, what the "real deal" actually turns out to be.

There are many, many forms of cancer - and vary from near 100% easy "cure rate" to near 100% death rate. Treatment can vary from very little to millions of dollars.

[Caduceus]

From policy wording:

Cancer refers to "malignant tumor characterized by uncontrolled growth of malignant cells or invasion of tissue. It includes carcinoma in situ or new growth of cancerous cells which have not yet infiltrated normal tissue beyond the epitheliel basement membrane. We do not cover tumors that are pre-malignant or of uncertain behavior. The malignant tumor must be confirmed by a medical professional."

I am not a medical professional, so perhaps I am missing something, but the policy summary above this paragraph states that this policy is designed to cover cancer at all stages, even the earliest stages.

[JoeRetire]

Yes, it is completely separate cover. The policy wording is very straightforward and simple. It will pay out upon cancer diagnosis at any stage. It specifically allows the sum to be claimed even if the person assured is covered under other policies.

Basically, the sum is paid if he gets cancer. It's as simple as that.

You speak of "capped at $300,000" and "the sum is paid". Seems unlikely that the "cap" and the "sum" are the same. But I suppose anything is possible.

Read the policy carefully. If you think you'll cash out the full $300k no matter what the cancer, then it sounds like a good bet. Pay the premium and hope you never collect.

[J295]

Health Insurance worked fine for us. Personally have no interest in this sort of supplement. Cancer surgery at Mayo seven years ago by the way. ymmv.

[dm200]

From policy wording:
Cancer refers to "malignant tumor characterized by uncontrolled growth of malignant cells or invasion of tissue. It includes carcinoma in situ or new growth of cancerous cells which have not yet infiltrated normal tissue beyond the epitheliel basement membrane. We do not cover tumors that are pre-malignant or of uncertain behavior. The malignant tumor must be confirmed by a medical professional."
I am not a medical professional, so perhaps I am missing something, but the policy summary above this paragraph states that this policy is designed to cover cancer at all stages, even the earliest stages.

OK - Just let us know how this all turns out - one way or the other.

There has to be either a "catch" (a big one) or something grossly misunderstood.

[Trader Joe]

I know all the typical arguments against buying cancer /dread disease insurance but I was reading through a policy document offered to my fiance and it seems like a good deal, so I wanted to know what you folks thought. It might be something offered specifically to high level executives.

Premium is $250 a year, and coverage is for $300,000 and will pay out upon any diagnosis of cancer, no matter how minor. They will pay out even if it's something like, say, skin cancer found through a mole that's easily removed. The coverage is capped at $300,000. Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.

250 / 300,000 = 0.083%

I might be wrong, but the chances that anyone will get cancer in any given year must surely exceed that percentage by a fair amount. So, acturially speaking, would it be rational to purchase this?

The way I look at it is that at some price, insuring against a risk is reasonable. So, I would certainly buy coverage for $300,000 for $1. I would almost certainly buy it for $10 a year. I am curious how to go about thinking about the pricing of this risk and I don't quite understand how they can offer coverage at this price. It seems mispriced and the insurance company seems certain to lose over time.

No, I would not purchase this insurance instrument.

[afan]

Thia seems to have nothing to do with the cost of treatment. It is a bet by the insurance company that low risk young patients will rarely get cancer and that premium increases and policy lapses will make this profitable as clients get older.

Assuming the person to whom they are trying to sell the policy is young, $250 is not necessarily that cheap. I would look into making sure there is enough term life insurance and disability insurance. For a young person, another $250 will buy a meaningful increase in coverage for these kinds of policies.

I might view it differently if the policy would still be honored if the client was asymptomatic when issued but had a strong family history of cancers that have a major genetic component. Then the risk of cancer in a few years might be substantial and the bet would be likely to pay off. I would worry that such people might be excludes from coverage.

I assume the the policy is non-cancelable and guaranteed renewable. If not, then of course do not consider it.
Look at whether the list of premiums for later years is an assumed figure, perhaps valid now but could change at any time or is guaranteed for the life of the policy.

When the long term care insurance market blew up there many people who had been paying for years and were now getting into the age where it was becoming likely they would need it. Then they found themselves confronted by huge premium increases. Often more than they could afford or more than the coverage of the policy was worth.

[2pedals]

Does your relatives have a history of any form of cancer?

Cancer insurance may be more important for people with a family history of the disease.

[Stinky]

Could you share what insurance company is offering this policy?

Yes, please post the insurance company name. Also the product name, “form number”, or anything else that would help to specifically identify the product in question. I’d love to see the policy form and advertising materials if I can find it on line.

I’m surprised that there would be a policy that paid a lump sum of $300k for ANY diagnosis of cancer, no matter how minor. I’d love to see if you have found such a policy. I have heard of products that paid a smaller lump sum, but none this high.

[drawpoker]

.....The only exclusion listed is for any pre-existing conditions that directly caused the cancer that the person insured should have reasonably known or be aware of. .......................
My guess is that perhaps the firm offering this policy is trying very hard to get clients to sign up........

That "only exclusion" as you call it is a pretty Big Red Flag, isn't it? Pretty broad. "Any" pre-existing conditions? Whether or not the insured recognized them as such?

You get skin cancer, nope, that's excluded. You spent way too much time out in the sun without using sunblock - shoulda reasonably known.
Lung cancer? Maybe you didn't smoke cigarettes but lived with second-hand smoke - parent, sibling, spouse. Sorry, shoulda reasonably known.
Liver cancer, nope, you drank alcoholic beverages, shoulda reasonably known. Pancreatic cancer, nope, those summer jobs spraying ag chemicals, shoulda reasonably known. Thyroid cancer, nope, excluded, we looked up all those dental x-rays you had as a kid, way too excessive, you shoulda known better.

And so on.

Your guess is correct. The firm is trying very very hard to get people to sign up. Uphill battle as Consumer Reports and other watchdog groups have been telling people for over 30 years not to buy dread disease insurance policies, they are not worth the money, and it is often difficult to actually collect on claims.

[toofache32]

From policy wording:

Cancer refers to "malignant tumor characterized by uncontrolled growth of malignant cells or invasion of tissue. It includes carcinoma in situ or new growth of cancerous cells which have not yet infiltrated normal tissue beyond the epitheliel basement membrane. We do not cover tumors that are pre-malignant or of uncertain behavior. The malignant tumor must be confirmed by a medical professional."

I am not a medical professional, so perhaps I am missing something, but the policy summary above this paragraph states that this policy is designed to cover cancer at all stages, even the earliest stages.

Many pathologists consider carcinoma in situ to be a pre-malignant condition. Interesting wording.

[MikeG62]

Don’t think the OP has disclosed the name of the insurer, but this sounds like the kind of policy Aflac would write.

[Shallowpockets]

Too good to be true = too good to be true.

There's probably a snake in that there grass.

[dm200]

Don’t think the OP has disclosed the name of the insurer, but this sounds like the kind of policy Aflac would write.

Yes - probably not a big general insurance company.

[Stinky]

Don’t think the OP has disclosed the name of the insurer, but this sounds like the kind of policy Aflac would write.

Yes, AFLAC writes cancer insurance. But they're a very smart company, and they wouldn't underwrite something that sounds fundamentally actuarially unsound. And paying $300k for any incidence of cancer sounds very aggressive.

There are a lot of second-tier, smaller companies that write cancer insurance also. Sometimes those companies do dumb things. My suspicion is that it's one of those companies.

[dm200]

Don’t think the OP has disclosed the name of the insurer, but this sounds like the kind of policy Aflac would write.

Yes, AFLAC writes cancer insurance. But they're a very smart company, and they wouldn't underwrite something that sounds fundamentally actuarially unsound. And paying $300k for any incidence of cancer sounds very aggressive.
There are a lot of second-tier, smaller companies that write cancer insurance also. Sometimes those companies do dumb things. My suspicion is that it's one of those companies.

I hope we can, eventually, learn "the rest of the story"...

My guess is that this insurance turns out to be not as presented/interpreted - BUT we shall see (I hope)

[JoeRetire]

Anyone else creeped out by the thought of this sort of "cancer arbitrage"? Feels too much like "Hope I don't have a heart attack. But if I get cancer then I can really cash in!" to me.

[RickBoglehead]

I can tell you that AFLAC is expert at promoting this kind of "scare tactic" insurance.

My mother bought two different AFLAC policies decades ago, one of which was a Cancer policy. Some years back I convinced her to cancel both. Among other things, they make presentations in senior buildings to people that have no clue.

[dm200]

Just "anecdotal" - but it seems to me that the very word "Cancer" frightens and scares so many people, while "heart attack" or "stroke" does not nearly as much.

I think, though, that heart attacks and stroke are much more likely to kill or disable us.

[goodenyou]

From policy wording:

Cancer refers to "malignant tumor characterized by uncontrolled growth of malignant cells or invasion of tissue. It includes carcinoma in situ or new growth of cancerous cells which have not yet infiltrated normal tissue beyond the epitheliel basement membrane. We do not cover tumors that are pre-malignant or of uncertain behavior. The malignant tumor must be confirmed by a medical professional."

I am not a medical professional, so perhaps I am missing something, but the policy summary above this paragraph states that this policy is designed to cover cancer at all stages, even the earliest stages.

That is an interesting choice for a username for "not a medical professional". I would be cautious of counterparty risk on this one.

[wolf359]

I know all the typical arguments against buying cancer /dread disease insurance but I was reading through a policy document offered to my fiance and it seems like a good deal, so I wanted to know what you folks thought. It might be something offered specifically to high level executives.

Premium is $250 a year, and coverage is for $300,000 and will pay out upon any diagnosis of cancer, no matter how minor. They will pay out even if it's something like, say, skin cancer found through a mole that's easily removed. The coverage is capped at $300,000. Only medical underwriting is a short declaration that he's never had any cancer diagnoses, or any lumps. No other medical declarations required.

250 / 300,000 = 0.083%

I might be wrong, but the chances that anyone will get cancer in any given year must surely exceed that percentage by a fair amount. So, acturially speaking, would it be rational to purchase this?

The way I look at it is that at some price, insuring against a risk is reasonable. So, I would certainly buy coverage for $300,000 for $1. I would almost certainly buy it for $10 a year. I am curious how to go about thinking about the pricing of this risk and I don't quite understand how they can offer coverage at this price. It seems mispriced and the insurance company seems certain to lose over time.

Premiums are low because the risk of payout is low.

Compare to car insurance. Car insurance is much more expensive, because the odds of being involved in a car accident is much higher. If the risk is high, and the consequences are potentially high, then you need just what insurance you can afford.

Just because the price is cheap doesn't mean you should do it. If you have health insurance, you're already covered for cancer. So what additional risk are you insuring against? If you're simply betting that you'll get cancer so you can "win" an additional payday, then you're making a wager, not seeking to offset a risk. And you're betting against people who can calculate the odds better than you can, because they have the data to make the calculations. Here the risk of the event is low, and you're already covered for the risk.

If the risk of claiming is low and the consequences of that event are high, then you should consider that insurance. An example is umbrella liability coverage. It's very unlikely that you will have a high liability claim that is not already covered by car or home insurance. But if you do, you want to be covered (because it's affordable to do so.)

[midareff]

My wife, a Thai person, buys Cancer specific coverage in Bangkok and has for years. If she drops it hey do not allow a restart so on it goes. It's a bit under $200 and she lost her father to cancer and is big time p a r a n o i d about it. Every little ache or pain is.. "Is it cancer?" I pay for it for her and her regular medical as well as medical here. Probably, as my sun is ready to drop below the horizon it will be time to relocate there where she has family. Neither of us has family here and it just seems like the right ting to do. I had Prostate Cancer here in 2012 and was successfully treated, as in, I couldn't possibly love long enough to die from it at this point (72 this month).

I think if you are going to sweat it and can afford it do what you think is right for you.

[AznSaver]

Cancer refers to "malignant tumor characterized by uncontrolled growth of malignant cells or invasion of tissue... The malignant tumor must be confirmed by a medical professional..."

My .02 from an insurance background... Dread policies if poorly written/underwritten by the insurer can be a great bet throw money away at but they tend to be just that... I don't have a medical background either however the simplistic "layman's terms" of the policy are a lot more specific than they lead to be if what you wrote was a direct quote. This policy like most will not cover precancerous growths or non-growing tumors, limiting the scope of it's definition, I wouldn't be suprised if it broke down/categorized covered loss like an AD&D (accidental death/dismemberment) policy.

Usually policies like these are addendum/side policies for group coverage plans, it might seem like they sound like a bad bet on the insurers part, but what is often overlooked is how narrow the scope of their definition for covered losses are and the scale in which these policies are sold/payout rate. If the "take" rate of the policies fall below a certain threshold insurers often drop these policies.

The US has the 5th highest cancer rate in the world with it's 2012-2016 listed rate of 448 case per 100,000 people. You would have a rate of .00448 chance of cancer if you think it's a good bet go for it. I would typically only get these types of policies if they are offered as multi-year/age-limited single premium (e.x. $3,500 for coverage good until age 60)