Critical Illness insurance - A must have

As we cruise along, busy in our daily lives and routine, sometimes we wake up to depressing news about a dear family member, friend, colleague or acquaintance contracting a critical ailment. This leaves us wondering about the unpredictability of life. The silver lining is that medical advancements have made it possible to treat and cure many critical ailments; however, this does not come cheap.

Critical ailments like cancer, cardiac diseases, stroke etc can strike suddenly and in its wake not just cause physical and emotional trauma but can also cripple one financially. Most people are forced to dip into their savings, accumulated carefully for a glorious future, for treatment and even run up debts in their fight against the disease. We come across many crowd funding requests in Facebook and other social media requesting financial aid for someone suffering from a critical ailment. These are mostly cases where the families have exhausted all their financial resources and are looking outwardly for help.

The figure below taken from Economic Times dated May 29, 2017* is self-explanatory with regards to the financials needed to fight a critical disease.




















So, what is the way out. Is it to pray and hope that we and our loved ones do not fall prey to a critical disease or be prepared to fight it in case such an unfortunate eventuality does arise. Most of us will agree with the latter and this is where critical illness insurance comes into the picture. Let’s understand what this is and how it works.

Critical illness insurance is a defined benefit plan which aims at providing a lump sum amount (sum assured) on diagnosis of any of the covered diseases or for certain procedures/surgeries/transplants. It is aimed at providing survival benefit and most insurers have a survival clause. As per the survival clause, the sum assured can be claimed if the insured survives a period of 30 days (varies among companies) after diagnosis of the ailment. On meeting this clause, the sum assured is paid and it can be used for any purpose by the insured be it for treatment, household expenses, paying off debts, recuperation expenses, to make good the loss of income caused by the ailment etc.

You may wonder why you need a separate critical illness cover if you already have health insurance. The average health insurance policy in India is for Rs 2 lakhs. Thus, your health cover may be insufficient to fight a critical disease. Further, health insurance policies have various sub-limits for certain procedures, surgeries, tests, doctor’s consultation etc which may result in you paying a sizable amount from your pocket. Hence the need to have dedicated critical illness insurance.

Critical illness insurance comes in 2 variants i.e. it can be opted for as a critical illness rider with your life insurance/health insurance policy or you can buy a standalone critical illness policy. So, how do you choose which one to opt for. Providing below the differences between the two so that you can make an informed choice:

Parameters
Critical illness rider
Standalone critical illness policy
Sum Assured
The rider sum assured cannot exceed the sum assured of the base plan. For eg: For a term plan of Rs 10 lakhs, you can opt for maximum rider coverage of Rs 10 lakhs.
Offers flexibility, you can opt for the desired coverage amount, especially beneficial for those seeking higher cover due to susceptibility to certain diseases
Renewal due date
Coincides with the base plan renewal due date. No hassle of remembering multiple due dates. Easier to manage; a single policy provides life/health insurance and critical illness cover.
An additional policy to manage and deal with. Hassle of dealing with multiple insurance companies.
Premium amount
As it is attached to the base plan, the rider premium is lesser than a standalone plan. If attached to a life insurance policy, the rider premium remains constant throughout the policy term.
Needs to be renewed every 2-5 years (varies among companies). During renewal, the insured may need to undergo medical tests and premiums may increase on account of health issues and advanced age.
Policy term
Cannot exceed that of the base plan. Thus, during advanced age when chances of diseases are higher you may be without critical illness cover. 

Also, if you surrender the policy, the rider will cease to exist.
Some companies have an upper age limit of 50-60 years and some companies are providing lifelong renewal option.
No. of diseases covered
Covers less diseases compared to a standalone plan. 8-10 diseases covered (varies among companies)
Covers 10-37 diseases (varies among companies) thus providing wholesome cover.

Hope the above article has been informative. When you buy critical illness cover, also factor in medical inflation and accordingly choose the sum assured. With a Critical Illness cover, if the need so arises to use it, you can at least be relieved of the financial stress and focus all your energies on conquering the ailment.


* https://economictimes.indiatimes.com/wealth/insure/medical-inflation-lifestyle-diseases-make-critical-illness-insurance-a-must-heres-how-to-buy-it/articleshow/58867774.cms

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