Is the Critical Illness Insurance Payout Taxable?

A critical illness can be categorized as a type of health illness or health event that typically alters how you live. These health events may require surgeries, medications and therapies that can be costly. That's where critical illness insurance comes in—to help with the resulting medical expenses. These insurance plans are designed to help you financially following a life-threatening illness.¹

Because these types of health events often incur higher-than-average medical costs, it’s not uncommon for there to be expenses that are not covered by primary health insurance. A critical illness insurance plan often pay policyholders a lump-sum cash payment to help after their primary health insurance has been used.¹

Many policyholders find themselves navigating what the tax implications are for different kinds of insurance plans. It can be helpful to figure out upfront if the payout is taxable or if there are any tax-deductible benefits available. Before we explore how taxes are involved, here’s a brief overview of how our critical illness insurance works. Then, we’ll dive deeper into whether critical illness insurance is taxable or a tax-deductible benefit.

How Does Critical Illness Insurance Work?

Every critical illness insurance plan works differently, but Aflac offers lump-sum cash benefits for covered events. Affordable monthly premiums are available to help you keep your policy active so you can be better prepared for the medical expenses that can accompany a critical illness.

Our critical illness insurance offers benefits for specific life-changing events, like heart attacks and strokes. Often, these circumstances require a recovery period that may be expensive. You may also be able to access additional benefits surrounding second-time occurrences, hospital confinement and continuing care.

The cash benefits offered through Aflac Critical Illness Insurance can grant you the flexibility to use funds however you need them most. This means you can use the critical illness insurance cash benefits to help with surgery costs, medications or everyday expenses like rent or groceries. Our plans are accessible through your employer and individually. In both cases, we help make the application process easier for you.