A study released this week by Washington National Institute for Wellness Solutions says that the preponderance of middle-income Americans is financially unprepared for a critical illness diagnosis. A full 90%, IWS reports, lack confidence that they have enough savings to cover emergencies and the long-term implications of serious illness.

A critical illness diagnosis can be life-changing both financially and personally. Health plan participants face a significant risk of being diagnosed with one or more such illness – such as cancer, heart disease or Alzheimer’s. Most middle-income Americans say out-of-pocket funds will be necessary, given what is covered by their insurance, but many lack the savings to fall back on.

Out of 1,001 survey participants between the ages of 30 and 66 and annual household incomes of $35,000 and $99,999, 75% have less than $20,000 in savings. Half has less than $2,000 in savings and a quarter has no current savings.

One-fourth of respondents just “don’t know” what resources they would use to help offset their expenses, IWS says. Others would use credit cards (28%) or loans from friends and family (23%) or financial institutions (19%) to help cover what insurance doesn’t.

Americans, at least, understand how exorbitantly expensive critical illnesses can be. Forty-five percent believe they would never recover financially from a battle with Alzheimer’s disease or dementia; for cancer, that number is 38%.

Barbara Stewart, president of Washington National Insurance Company says it’s important for employees to educate themselves about the real-life costs of critical illness. “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,” she says.

Indeed, very few middle-income Americans have had those crucial conversations about critical illness financial planning, IWS reports. Most (60%) have not discussed finances in the event of a critical diagnosis with a loved one or adviser and 88% have not spoken about potential care-giving options.

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