Critical illness insurance: what the lump sum covers
Enter the lump sum on your policy, its yearly premium, and your health plan’s deductible and out-of-pocket maximum. The share of your worst medical year the payment covers appears at once.
Example, not your result yet· change a figure to see yours
Share of your worst-case medical bill it covers
100%
$8,500 of $8,500 out of pocket
| Share of the deductible | 100% |
| Left for other bills | $1,500 |
| Still yours after the payment | $0 |
| Years of premium the payment equals | 27.8 |
Defaults: the 2026 floor deductible ($1,700) and ceiling on out-of-pocket costs ($8,500) of an HSA plan, self-only. Enter your own plan’s figures.
Compiled by Radif Partners · How the figures are built · IRS rules and BLS plan data read November 7, 2026
Critical illness insurance pays a lump sum when a condition named in the policy is confirmed under the policy's terms. The list of covered conditions, the definitions each must meet and the share of the sum paid for each are contract terms, and they differ from one policy to the next; this page does not describe the conditions themselves. The value of the payment is measured in money. A $10,000 lump sum is more than the $8,500 most that a self-only plan qualifying for a health savings account can leave out of pocket in 2026 (Revenue Procedure 2025-19), and covers 59% of the $17,000 family ceiling. It equals about 10 weeks of take-home pay at a $60,000 salary, and 28 years of a $360 yearly premium. Bought with after-tax money, it is not taxable income (IRS Publication 525). It does not replace income during a long absence; disability insurance does.
A lump sum on a list
Critical illness insurance, sometimes called specified disease coverage, pays a fixed sum when one of the conditions in its list is confirmed according to the policy's own definitions. The list, the definitions and the amounts are the whole contract: two policies with the same name can cover different conditions, pay different shares for each, and exclude those that began before coverage. This site does not describe the conditions; it measures the payment against the costs and the income it is meant to support. Read the definitions page of the policy for what triggers it.
The calculator compares the lump sum with your health plan's deductible and out-of-pocket maximum, set by default to the 2026 limits for plans that qualify for a health savings account, $1,700 and $8,500 for self-only coverage (Revenue Procedure 2025-19), and with the premium.
Your lump sum against your plan
Example, not your result yet· change a figure to see yours
Share of your worst-case medical bill it covers
100%
| Share of the deductible | 100% |
| Left for other bills | $1,500 |
| Still yours after the payment | $0 |
| Years of premium the payment equals | 27.8 |
What the payment can do
A serious condition costs in two ways: the medical bills your plan leaves to you, capped by the out-of-pocket maximum, and the income lost while you cannot work. A $10,000 payment covers the self-only maximum of $8,500 with $1,500 to spare, and 59% of the family maximum of $17,000. What is left can replace pay: at $60,000, take-home pay is about $969 a week after federal tax and payroll tax, so the whole sum equals about 10 weeks. Beyond that, income during a long absence depends on short-term and long-term disability coverage, which pay monthly for as long as the contract allows.
Premium against payment
At $360 a year, the sum equals 28 years of premiums. Critical illness premiums usually rise with age at purchase and can depend on tobacco use; group versions sold at work are often voluntary and paid by the employee. As with accident and hospital indemnity coverage, the alternative is money set aside: a health savings account takes up to $4,400 a year for self-only coverage in 2026, deductible and tax-free for medical costs (IRS Publication 969), but it builds slowly, while the policy pays the full sum from the first covered event after its waiting period.
Tax on the lump sum
IRS Publication 525 excludes benefits received under an accident or health policy whose premiums you paid, or whose premiums your employer paid but included in your income. A lump sum from a policy paid with after-tax payroll deductions or bought directly is therefore not income. Paid by the employer, or with pre-tax deductions, the payment falls under the rule for employer-funded plans: amounts that do not reimburse medical care can be taxable. Since the difference can be a fifth or more of the sum, check the deduction label on your pay slip at enrollment.
Questions to ask
Which conditions are covered, and with what definitions? Is there a waiting period from the start of coverage, and a survival period after the event? What share is paid for each condition, and can the policy pay more than once? Does coverage end or shrink at a certain age? Is the premium fixed or can it rise? The answers are in the certificate or the policy, not in the brochure.