Critical illness insurance, otherwise known as critical illness cover or a dread disease policy, is a health insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy. A critical illness insurance policy covers the insured against life-threatening critical illnesses such as cancer, heart attack, renal failure etc. This insurance policy provides coverage in the form of a lump sum at the time of diagnosis of a covered illness, subject to crossing the survival period.
The lump sum is the sum insured can be used for the treatment expenses and is not related to the actual expenses incurred for treatment. If you are already covered under a comprehensive health insurance plan which can be a group cover from your employer and need extra insurance for life threatening situation then choose critical illness plan. Do not second guess as why buy another insurance and clutter coverage? In case if you are diagnosed with a critical ailment which may require specialized treatment and your basic health plan would consider that as a limit on doctor’s fee and wont cover for full medical costs. In such cases you may avoid paying from your pocket if you have already purchased a Critical Illness Policy. These plans can cover for cap on specific expenses such as medicines, intensive care unit or prosthetic. Diseases like Cancer, Multiple Sclerosis, Paralysis, Coronary Artery Bypass Surgery, Major Organ Transplant, Primary Pulmonary Arterial, Hypertension, First Heart Attack, Stroke, Kidney Failure, Arota Graft Surgery, etc can be covered by insurers under these plans.
So what are some of the Features of Critical Illness Insurance Plans?
There are quite a few important features of Critical Illness insurance plans that one must note: Critical Illnesses (CI) Defined – The most important feature is that under the CI Plan Coverage, there are defined number of illnesses only covered. All insurance companies provide a list of the illnesses/ailments that are covered so that the applicant will be aware of what’s covered. Kindly note that any ailment/illness other than those named/listed by the insurance company will not be covered. Some important ones that all insurance companies cover include First Heart attack, Cancer, Kidney Failure, Stroke etc.
Survival Period – Every CI policy comes with a survival period benefit, this means that post detection of the critical illness, the insured will need to survive this period in order to ensure the claim becomes payable. This is normally 30 days. Hence for example, if one has suffered a Stroke, he/she will need to survive 30 days and then the claim is payable. This is important to note, so incase the insured unfortunately passes away during the survival period, then there is no claim paid by the insurer.
Income Tax Benefits under a CI Insurance Policy – The policyholder can avail tax deductions under the Income Tax Act, 1961. Tax exemption can be claimed upto ₹15,000 under Section 80D of the Income Tax Act, 1961. Senior citizens can avail tax benefit up to ₹20,000 under the same section.
Single Lump-sum Payment – The insurer pays the sum insured as a single lump sum payment for the treatment of covered illnesses, subject to crossing the survival period. What is important is that since this is a fixed benefit plan, the sum insured is p aid in full, irrespective of the expense incurred. For example, if the Sum Insured of the policy is ₹5 lacs and the treatment expenses are only ₹3 lacs, the entire SI of ₹5 lacs will be paid to the insured.
Loss of Job / Income – Following a critical illness, it is most likely that the insured may need to stay away from work for a period of time or may even have to give up his/her job based on their health condition. Hence the claim is used as an income replacement for the insured.
Simple Claim Processing – The documentation at the time of a claim under the plan is very minimal given that the policy covers defined illnesses/conditions for which supporting documentation needs to be provided for the claim to be settled The claim can be easily settled based on the diagnosis report(s) submitted by the insure
Policy Termination on Claim Payment – Unlike a regular Indemnity based health insurance plan, in a CI policy, once the claim is settled on detection of a covered critical illness and crossing the survival period, the CI policy will automatically cease to be in force.
What are the factors to keep in mind while buying a Critical Illness Plan?
| Factor to be kept in mind | Remarks |
|---|---|
| Should you buy a Standalone Critical Illness Insurance Policy or Critical Illness Insurance Rider? | A standalone CI has a higher premium when compared to a rider, since it offers more comprehensive coverage when compared with the latter. |
| Number of Critical Illnesses Covered (Range from 6 – 40) | The insurance company lists the exact illnesses covered under their plan. Important to note that no other illnesses/ailments will be covered |
| Sum Insured | There are CI plans which offer coverage for even upto ₹100 lacs, one must opt for an optimum sum insured depending on their age, family history, pre existing medical conditions etc |
| Age of Insured | This is an important factor which determines the coverage / premium for the CI plan. |
| Survival Period / Waiting Period | All CI plans come with a survival period, normally 30 days, post which claims are settled. There is also a mandatory waiting period of 30 days from the start of the policy during which no claims are payable at all. |
| Maximum Entry Age | Each plan has a maximum entry age after which the applicant will not be able to apply for a CI policy, this is normally 60-65 years. |
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