Is Supplemental Cancer Insurance Worth It? Pros & Cons

According to the American Cancer Society, men have a one in two chance of developing cancer in their lifetime, while the odds for women are one in three.

Therefore, purchasing supplemental cancer insurance should be worth it financially for 50% of men and 33% of women.

On the other hand, half of men and two-thirds of women get no return but have peace of mind, allowing them to sleep better at night knowing their finances are protected.

Learn the pros and cons as we dissect an example two-parent family policy costing $47 per month. Decide if signing up makes sense, and be sure to act before a diagnosis or test and not after.

Supplemental Cancer Insurance Pros

First, consider the supplemental cancer insurance advantages to help you decide if a policy is worth it. Compare the certain costs to the uncertain benefits should a family member contract this illness.

Simple Underwriting

Families predisposed to the disease can enroll in supplemental cancer insurance, creating a hidden positive. The three-question application process and underwriting rules make it easy.

  1. Have you been diagnosed or treated for cancer in the last five years?
  2. Are you waiting for results from an earlier test for cancer?
  3. Have you ever been diagnosed with AIDS or a related condition?

Notice that the application questions do not ask about the medical history of parents or siblings, tobacco usage, or the presence of BRACA gene mutations. Each of these factors and age suggests a higher risk of future malignancy, yet your costs and ability to be approved for coverage remain the same.

Sign up before age 69 to take advantage.

Tax-Deductible Premiums

Another positive point is that supplemental cancer insurance premiums are tax deductible, making upfront expenses more affordable. Although the first is superior, you have three options to lower after-tax costs.

  1. Pretax payroll deductions of premiums generate first-dollar savings with no thresholds to meet and help you avoid FICA taxes.
  2. Taking tax deductions for premiums on Schedule A helps only after meeting two critical thresholds first.
    1. All itemized deductions exceed the personal deduction
    2. Deductible medical and dental expenses top 7.5% of Adjusted Gross Income
  3. Self-employed workers can deduct the premiums on Schedule 1 without meeting thresholds first before realizing savings.

For example, a family living in California with an income of $100,000 paying for a policy at work through pretax payroll deductions could reduce their premium costs by 38.95%.

  • Federal: 22%
  • State: 9.3%
  • FICA: 7.65%

Wellness Benefits

The wellness benefits paid before diagnosis represent a hidden advantage of supplemental cancer insurance because they reduce your upfront costs, making the policy more affordable.

Our example policies make immediate cash payments of $75 per covered person annually for screening tests to detect early signs of malignancy.

Blood TestsImaging StudiesInvasive Exams
CA125 OvarianMammographyBiopsy of skin lesion
CA 15-3 BreastBreast UltrasoundColonoscopy
PSA ProstateChest X-rayFlexible Sigmoidoscopy
CEA ColonThermographyBone Marrow Aspiration
Serum ProteinVirtual Colonoscopy 

Also, our example policy pays $75 for Pap smears, meaning a family with two daughters between the age of 21 and 26 could offset costs up to $225 if their gynecologist recommends annual testing.

Possible Payout

The most significant advantage of supplemental cancer insurance is the possible payout should you or a family member contract this dread disease. People often fight the illness for years, racking up significant claims opportunities with each step in their battle.  

Estimating the total benefits paid is impossible, as our example policy honors claims for a broad array of treatments, services, and related expenses, and each person’s journey differs. However, this small sampling can give you a sense of the possible daily payout.

  • Initial Diagnosis: $5,000 once per person
  • Inpatient Benefits
    • Hospital confinement: $200
    • Ambulance: $200 per trip
  • Treatment Benefits
    • Radiation or Chemotherapy: $200
    • Anti-nausea medication: $40
    • Medical imaging: $250 per study
  • Surgical Procedures
    • Surgeries: up to $3,000
    • Anesthesia: 25% of the surgical benefit
    • Prosthesis: $3,000 per device
  • Transportation and Lodging
    • Travel expenses: $.50 per mile
    • Hotel reimbursement: $75
  • Extended Care
    • Skilled nursing facility: $100
    • Home health care: $100
    • Hospice: $70

Bear in mind that the listing of benefits in our example policy is far more comprehensive compared to this sample. Also, lifetime limits sometimes apply.

Supplemental Cancer Insurance Cons

Second, examine the supplemental cancer insurance disadvantages to help you determine if buying a policy is worth it for you and your family. Compare the certain costs to the uncertain benefits through a darker lens.

After Diagnosis

The inability to purchase supplemental cancer insurance after diagnosis is a perceived drawback. You must be cancer-free for at least five years to qualify for coverage.

You can buy health insurance after a cancer diagnosis, but not supplemental policies. The Affordable Care Act does not require the issuing companies to cover pre-existing conditions with no waiting period.

The issuing companies do not want to trade thousands of claims payments for $47 monthly premiums. Would you?

Certain Costs

The certain premium costs paid before a diagnosis are a perceived negative of supplemental cancer insurance. You are making an educated bet that you hope you will lose.

However, the upfront $47 per month premiums from our example policy are not as costly as they seem at first glance. Be sure to factor in the savings on tax deductions and wellness benefits.

  • Gross annual cost: $564 ($47 X 12)
    • Pretax savings: $220 (38.95%0
    • Wellness benefits: $150 (two claims)
  • Net premium cost: $194

Uncertain Benefits

The corresponding drawback of supplemental cancer insurance is the uncertain downstream benefits (see payouts above). Our example policy only honors claims after a licensed medical professional diagnoses a malignant condition (except for wellness benefits).

In other words, 50% of men and 67% of women will not get a financial return on their premiums. You are buying a policy to cover a narrow set of conditions, but do get peace of mind no matter what happens in the future.

Taxable Lump Sum

The taxable lump sum benefits are another perceived disadvantage of supplemental cancer insurance. Our example policy includes an initial diagnosis benefit of $5,000 unconnected to a specific treatment or expense.

Indemnity benefits that are lump-sum payments made without regard to whether the insured incurred a medical expense may be taxable income. Expect the issuing company to issue a 1099 form for any amounts above $600.

Of course, we say “perceived” disadvantage because the people needing to pay the taxes on a lump sum feel that purchasing a policy was worth it many times over.