importance of critical illnesses coverage

The Importance of Critical Illness Coverage

There is hardly anyone in this world who can predict the exact future, consistently over time.

Your prediction is, at best, a mere guess. Life is full of risks and uncertainties, and we should try to face these situations wherever possible or mitigate the risks, wherever possible.

Insurance, as we all know, is a mitigating risk technique. However, there is something beyond a regular health insurance plan. Yes, that’s correct – We all are aware of routine health and life insurance policies, but very few of us know about critical illness insurance. Health and life insurance are for uncertain events, but ‘Critical Illness Insurance Policies’ are for those events that you can predict with certainty.

Critical illness insurance is all about peace of mind when you get covered against critical or life-threatening diseases like heart attack, cancer, etc.     

What would happen to you if you are diagnosed with or suffered from a critical illness?

A critical illness insurance plan will grant a lumpsum amount if you are diagnosed with a critical disease, a list of which is predefined in your policy document. Typically, it is a financial backup covering low probability and high-cost events.

Features of Critical Illness Insurance Policy

Have you ever pondered over, what will be the financial situation of your family, if you are diagnosed with a critical illness? Are you and your family secured? What about the illness coverage?

The answer to all such questions lies in the features of critical illness insurance-                      

  1. Income replacement – In case of a critical illness, you get devoid of your income. In such a situation, you either have to use your savings or forcibly get into a debt trap. Critical illness insurance provides you with a lump sum amount for use. Thus, it offsets the financial risk of your family.
  1. Coverage- You are offered comprehensive coverage for up to 36 critical illnesses, these are-
  • Kidney failure 
  • Heart Attack
  • Major Organ Transplant                              
  • Cancer
  • Alzheimer                                                        
  • Paralysis, etc
  1. Waiting Period- If you are diagnosed with a critical illness, you need to survive for the next 30 days to make your claim. All the necessary procedures are enlisted in your policy document. This lessens the complications at the time of coverage.
  1. Lump-sum payment- The insurance company provides you with a lump sum amount for critical illness treatment. This lump sum paid out to you as a cover depends on your diagnosis. Best case scenario for you will be when you are given a lump sum amount equal to the sum insured.
  1. Company’s Debt- Illness insurance is of debt nature for the insurance company. Company though pays a lump sum amount but can even pay this amount either on the time of critical illness situation or on the death of the policyholder.
  1. Tax benefits- Premium paid out under critical illness insurance is tax-deductible. Under the section 80D of Income Tax Act, 1961, you can avail tax exemption of up to ₹15000, and for senior citizens, they can avail the tax benefits up to ₹20,000.

Inclusions in a Critical Illness Insurance Plan

  • Loss of speech                                    
  • Permanent paralysis of limbs
  • Last stage of lungs disease
  • Heart attack
  • Bone marrow transplant
  • Aplastic Anemia
  • End-stage liver disease
  • Cancer disease
  • Multiple Sclerosis 
  • Kidney failure requiring regular dialysis

Exclusions in Cover of Critical Illness Insurance

  • Cosmetic surgery
  • Treatment underwent outside India
  • Illness caused due to tobacco, smoking, alcohol or drugs intake
  • Infertility treatment
  • Hormone replacement
  • Illness caused due to civil war, terrorism, military or navy operations
  • Dental care                                          
  • HIV/AIDS

Difference Between Critical Illness and a Health Insurance Plan

  • Nature 

Critical illness insurance is a part of life insurance, whereas health insurance is a part of general insurance. It depends on the insurance Company whether to provide critical illness as an add-on cover on an existing policy or as an individual policy. Health insurance is for general health needs, whereas Critical illness insurance is for more specific needs.

  • Coverage

Health insurance offers extensive coverage; it covers all your medical and hospitalization expenses. Critical illness insurance, just fulfilling a specific purpose, covers 8-36 life-threatening diseases. Both are useful for fulfilling their objectives.

  • Sum assured

Both health and critical illness insurance have their varied aims. Therefore, the sum assured should also vary. A health insurance plan has a comprehensive coverage which goes up to 5-6 crores. Critical illness insurance, on the other hand, covers specific needs up to 10- 25 lakhs.

  • Claim payment

In health insurance, hospitalization must exceed 24 hours to avail your claim. Then it might depend on the situation whether the claim should be cashless payment or the reimbursement. In critical illness, you have to survive for successive 30 days after the diagnosis to make a claim. Claim amount then depends on your diagnosis report. In most cases, the full amount is paid by the insurance company.

  • Premium flexibility

You can alter the premium after a specified period; thus, the premium amount is high in health insurance due to extensive coverage. You, on the other end, buy, critical illness insurance, for a specific purpose, therefore, not much of the alterations can take place. Thus, the premium amount is cheaper.

Why Critical Illness Insurance?

Life is like a journey on the road, sometimes smooth and sometimes with speed breakers. Critical illness insurance acts as a shocker resistance for speed breakers like cancer, heart attack, etc. It balances the uncertainties in a manner- 

  • Peace of mind- It is the ultimate satisfaction. If you are well aware in advance that your future is secured, you can live your life peacefully. Critical illness insurance secures your future in such a manner that you and your family will get compensation whenever you face any critical illness.
  • Financial backup- If you suffer from any critical illness in the future and you are unable to undergo treatment due to lack of funds. Critical illness insurance will cover all your medical expenses and give you the claim amount due to a replacement of loss of income due to the illness as well.
  • The standard sum assured- critical illness is a shallow probability event. Critical illness insurance offers you a sum assurance of 10-20 lakhs. This doesn’t put the burden on you as with standard sum assured comes the low premium payment. Tax benefit, along with the premium is also an essential criterion.
  • Hospitalization and other expenses- Critical illness insurance help you to avail a sound treatment by covering your hospitalization and other additional costs. Critical illness insurance also provides with a hospital network. This makes your hard times a bit easy by making the tedious task of finding a good hospital, trouble-free.
  • Corrective measure- Critical illness insurance is an action taken to secure your future. It provides you with a lump sum amount at the time when you need the funds at your discretion the most. It provides you with either maximum age renewability of lifelong renewability.

It depends on you, what kind of insurance you should opt for. But it’s better to select insurance which provides benefits to your family as well. You can purchase critical illness insurance without being asked any medical questions even if you have an existing illness. Complete research and comparison is a must before the selection of the right policy matching your lifestyle.

Importance of Critical Illness Coverage

How can I supplement critical illness insurance with health insurance?

Though both critical illness insurance and health insurance are different, they can supplement each other quit effectively. Health insurance is an indemnity plan which pays your total expenses incurred, up to the sum assured. In critical illness insurance, you are assured of fixed benefits paid on the diagnosis. Former is extensive, whereas the latter is very specific covering a maximum of 36 diseases. A combination of two different pricing models can give you combined benefits that can cover your risk more effectively. Thus, critical illness insurance pays you benefits over and above what your health insurance may pay.

What are the benefits if I don't claim on my health insurance?

When you don't go for any cover in a year, you can enjoy No Claim Bonus (NCB). It is bonus money added to your sum assured. You also get a discount on the premium at the time of renewal, for a claim-free period. It depends on your insurance contract, the number of years you are required not to file any claim. The discount rate may vary from one insurer to the other, but generally, 5% discount the next year is offered for every claim-free year.

Is there waiting period under critical illness policy?

Yes, the waiting period is applicable under critical illness insurance. The waiting period is the time frame after the purchase of policy in which no benefits are paid. You need to survive for 30 successive days after the diagnosis to avail thee benefits. Once the waiting period is over, you can avail and enjoy the benefits, sometimes along with the add-on covers.

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