You are currently viewing The Importance of a Critical Illness Policy

Sachin and Anjali are living a comfortable life. He is doing well in his career. They have their financial plan in place to take care of their children’s education, a foreign holiday and their retirement plan. They also have medical and term insurance. They are pretty confident about their future since they have covered all their bases or have they?

Off late, there is a steep rise in life-threatening diseases or critical illnesses like heart attack and cancer. A few weeks ago, there was a headline in the Times of India: Cancer cases up more than 300% in a 1 year.

Sticking to a healthy diet and following an exercise regime can keep many such unwanted ailments at bay. Sometimes due to hereditary reasons but mostly with age, the chance of developing a life-threatening life-style disease increases. Unlike minor ailments, the treatment in such cases can be a financial drain on the family as the costs may run into several lakhs.

If one has comprehensive health insurance; do they need a Critical Illness Plan?

Many people assume they’re fully protected with a standard health insurance plan, but the exorbitant costs of treating life-threatening illnesses are usually more than any plan will cover. 

A Critical Illness policy works differently than a Mediclaim plan. A CI plan is a health insurance plan that pays a lump sum amount, equal to the sum insured, to the insured on acquiring a serious aliment such as cancer or a stroke. A CI cover provides a lump sum benefit which can pay for the cost of care and treatment, recuperation expense and even pay off any debt if taken. Regardless of your hospital expenses, the insurer pays the full sum insured.

This is different from your usual Mediclaim or health insurance policy. Your health insurance policy reimburses only your hospitalization expenses.

critical illness and health insurance comparison

Say Sachin has a 10 lakh health insurance plan and a 25 lakh Critical Illness cover. If he is diagnosed with a critical illness and the hospital expenses amount to 7 lakhs, his health insurance will pay for only the hospital expenses: 7 lakhs.

What about the non-hospitalization medical expenses, which are often very high in such cases. This is where the CI plan comes in. The CI plan will provide a lump sum benefit of 25 lakh which can probably help in compensating for the loss of income, paying EMI dues, household and child care expenses.

What is covered?

The number of critical illnesses covered by insurers varies. Most insurers cover 8 to 20 major critical illnesses or more. These include cancer, coronary artery bypass surgery, heart attack, stroke, kidney failure, aorta surgery, heart valve replacement, major organ transplant and paralysis.

5 benefits of critial illness

Should one opt for a Standalone policy or an Add-on Cover (Rider)?

If you want to purchase a policy with better coverage for critical illnesses, the standalone policy is the best. Given the expenses one incurs on the treatment of critical illness, the higher coverage is better. However, if you are okay with less coverage and looking for an add-on feature on the cheaper side, then a critical illness rider is the answer.

Tax Benefit

Bought from any company, critical illness insurance also gives you tax benefits under Section 80D of the Income Tax Act; up to Rs 25,000 for individuals below age 60 and up to Rs 50,000 for senior citizens.

Waiting and survival period

Critical illness policies carry a survival period clause. Once the policyholder is diagnosed with a critical illness, the money isn’t paid immediately. The policyholder has to survive for typically 15-30 days after being detected.

In today’s rat race world of quick fixes, long commutes, and trying to fit 48 hours in 24, our health has taken a backseat. Further, our unhealthy lifestyle coupled with obesity, stress, unhealthy food habits and lack of exercise have deteriorated the situation. Due to a sedentary lifestyle, even younger people are suffering from critical ailments.

To conclude both policies are complimentary. While your health policy covers your hospitalization, the critical illness cover gives you a lump sum that you can use in your treatment. Money, excess of treatment costs, helps cover the loss of income.

This Post Has 2 Comments

    1. The Prudent Investor

      You’re most welcome!

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