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Medical expenses, especially those from a severe or critical illness, can be difficult to predict. And even with health insurance, they can place an unexpected financial burden on the person experiencing them.

In fact, 32% of American workers have medical debt1 and 66.5% of bankruptcies in the U.S. were due to medical issues.2

Many life insurance policies, such as term life insurance, include critical illness coverage that provides funds to help pay for medical expenses. It gives you the ability to cash in life insurance while still alive if you experience one of these eight critical health events:
  • Cancer
  • Heart attack
  • Heart valve replacement
  • Kidney failure
  • Major organ transplant
  • Paralysis
  • Stroke
  • Sudden cardiac arrest

How much money can you access?

Once eligibility requirements are met, and subject to policy limits, the benefit payment is 10% of the policy’s face amount or $25,000, whichever is less. Your insurance professional or our team of life insurance specialists can help you better understand the coverage available on your specific Nationwide policy.

What can you use the money for?

Because Nationwide doesn’t place restrictions on how the benefit is utilized, you can use critical illness coverage to pay for anything you need, including:

  • Medical bills
  • Co-pays
  • Deductibles
  • Transportation expenses
  • Even non-medical-related services while you heal (such as yardwork, child care, pet care, grocery/meal delivery or in-home care)

Are there any tax implications?

The death benefit, or the payout from your life insurance policy, is not taxable (subject to Internal Revenue Service limitations). However, it’s always a good idea to consult with a tax advisor about your specific situation.

Will you have to pay it back at any point?

No. The amount that you access is removed directly from your death benefit. However, for every dollar taken out, the death benefit will be reduced by more than one dollar because of a reduction factor.

Who needs critical illness coverage?

Critical illness coverage is automatically included on most life insurance policies. It’s for people who may experience a medical emergency and need help paying medical costs. There are some product and personal eligibility requirements, though:

  • It’s not eligible on 10-year term life products
  • There are certain underwriting restrictions
  • You must be under age 55

What else should you know?

In addition to the payout being taken from your death benefit at a more than dollar-for-dollar reduction, there’s also a $250 administrative fee. You’ll receive a snapshot of your policy before and after your claim, so you’ll know upfront what impact to expect.

Life insurance is meant to help you and your family feel confident that they’ll be protected if the unexpected happens. Critical illness coverage allows you to cash in life insurance while still alive for an added layer of protection.

Get more from life. See how critical illness coverage and term life insurance from Nationwide can help.

As your personal situations change (i.e., marriage, birth of a child or job promotion), so will your life insurance needs. Care should be taken to ensure this product is suitable for your long-term life insurance needs. You should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as gender, health and age, and has additional charges for riders that customize a policy to fit your individual needs.

[1] “32% of American Workers Have Medical Debt — and Over Half Have Defaulted on It,” Megan Leonhardt, CNBC.com (Feb.13, 2020).

[2] “Top 5 Reasons Why People Go Bankrupt,” Mark P. Cussen, Investopedia.com (Feb. 24, 2020).