Critical Illnesses Can Hurt Financial Security

May 7, 2013 ( – Dealing with a critical illness can derail even the best laid financial plans, according to a new study from the Washington National Institute for Wellness Solutions (IWS).

The study, “Middle-Income America’s Perspectives on Critical Illness and Financial Security,” found that an overwhelming majority (90%) of middle-income Americans say they are not financially prepared for a critical illness diagnosis. Only one in 10 feels strongly confident they have enough savings to cover family emergencies and handle the financial implications of a critical illness, such as cancer, heart disease, stroke or Alzheimer’s disease.

If diagnosed with a critical illness, most middle-income Americans say they would be forced to draw on savings to pay for out-of-pocket expenses not covered by insurance. But according to the study, many have little, if any, savings to fall back on: 

  • Three-quarters (75%) have less than $20,000 in savings;
  • Half (50%) have less than $2,000 in savings; and
  • One-quarter (25%) have no current savings.

To pay for critical illness costs, middle-income Americans say they would need to use credit cards (28%) or loans from family/friends (23%) or financial institutions (19%) to offset expenses not covered by health insurance. Another one-fourth (23%) say they simply “don’t know” what resources they would use to help offset their expenses. Millennials and Gen Xers anticipate greater reliance on credit cards and loans to pay for critical illness expenses.

Americans believe the financial impact of a critical illness can be lasting. Thirty-eight percent believe they might never financially recover from a battle with cancer, and 45% believe they would never recover financially from an Alzheimer's/dementia diagnosis.

The study found that despite these concerns, few middle-income Americans have had meaningful discussions about potential care-giving options or financial planning for critical illness. Eighty-eight percent have had no conversations with loved ones or advisers about potential care-giving options, and 60% have not discussed financial planning for critical illness. Only 12% have actively explored care-giving options.

"Educate yourself about the real-life costs of critical illness," said Barbara Stewart, president of Washington National Insurance Company. "Find out what your current insurance will—and will not—cover, and then assess your overall financial health. Identify the gaps between the resources you would need and the options already available to you."

The study was conducted in January 2013 by Zeldis Research. A cross-generational nationwide sample of 1,001 middle-income Americans ages 30 to 66 with an annual household income of between $35,000 and $99,999 participated in an online survey. Females and males each represented approximately 50% of survey participants.

More information, including key findings and the full study, can be found here.