27 January

Things you should know about critical illness insurance policies

Category: Moter insurance

What is Critical Illness?

It is a serious health condition which may lead to a life-changing effect on individual and family of Individual. It needs multiple hospital visits and requires a considerable amount of money towards treatment, which is amplified by your lack of income at the time, pushing your family into a state of financial shock, the income dries up and the expenses keep pushing and this is a vicious cycle that literally sucks money out of your finances like a black hole, your lifetime savings, your investments could all be just gobbled up by this black hole called critical illness.

Why do you need critical Illness cover when you have health insurance?

If your critical illness requires special care, while your health plan has a limited number of doctors listed and has a limit on the fee to be paid, then it won’t cover the entire treatment costs. Or, If there is a cap on expenses, like on medicines, ICU or Prosthetics and your bill are more than what the insurer will pay, you will be forced to pay from your own pockets, forcing you further towards financial bankruptcy.

To further the distress, the critical illnesses often leave people with disabilities (partial or total), loss of income and certain changes in lifestyle including dietary restrictions, physiotherapies etc. which in long run incur humongous costs adding your financial distress.

The critical illness plan pays you in lump-sum, unlike the indemnity policy which covers hospitalization. The lump-sum thus received can be used in ways you see fit, like paying off your debts, rehabilitation or to make up for your loss of income. It complements and supplements your health insurance portfolio.

The equilibrium:

Even though your critical illness plan covers your most expensive health conditions, it is the cheaper one. Your general indemnity plan has to cover large number of risks/illnesses and therefore is more expensive, while the critical illness plan has to cover a select group of diseases therefore reducing the risks and therefore the costs. For Example: a comprehensive health plan for a 30-year-old with a sum insured of Rs 5 lakh costs around Rs 6,000 a year. A critical illness policy with the same cover costs Rs 1,500 a year.

What you need to do is strike a balance between the two i.e. indemnity plans and critical illness plans, say “5 lakh” indemnity with twice or thrice i.e. 10-15 lakhs worth of critical illness plan would strike a good balance.

This or that?

With the market crowded with many players and each player offering several types of plans, one often gets confused with which one to buy. Well, critical illness plans are fixed benefit plans i.e. you get a lump sum amount irrespective of whether you remain hospitalized or your treatment expenses, however ,each plan has certain variation from the other so it’s prudent to give the policy document a thorough reading especially to terms and conditions. To state an example, most plans have a minimum survival period, i.e. the patient must survive at-least 30 days after he/she is diagnosed with critical illness, while some policies don’t have this clause.

One should also look out for the number of illnesses covered by the plan based on endemic diseases and family history.

Some policies have certain built in advantages/coverages like accidental death and disability (partial/total), others don’t, and therefore one should also look out for these added advantages. Also, Consider the list of illnesses covered, the cover amount, the claim procedure and the payment history of the insurer to decide on your plan. Most premiums vary between 1400-3500 Rupee.

Points to be considered:

1)   The Right size?

It should be based upon number of ailments being covered, age, medical history, family history, treatment costs, recurring costs and future financial liabilities in case of income loss along with your existing covers. Generally 2-3 times the amount of your general health insurance strikes a good balance.

2)  Standalone or Rider

Well, the critical illness plans can be bought as standalone policy or be clubbed with your health insurance policy, this now is called as rider. The terms and conditions are more or less the same and are chosen only based on your requirements.

A standalone policy would offer you more flexibility, in chossing the sum insured and provides larger covers. The limit on sum insured under a rider is usually the same as the base policy. So, if you have a health plan or term insurance of Rs 2.5 lakh and buy a critical illness rider with it, it is unlikely that the insurer will offer you a sum insured of more than Rs 2.5 lakh for the add-on cover. A standalone policy would be costlier than a rider as it comes with an option of choosing a higher sum insured.

The advantage of a standalone critical illness plan is that it is not compulsory to renew your health or life plan if you want to keep the critical illness cover. Riders are recommended as clubbing covers can facilitate easy management.

Sold by both Life Insurance companies and General insurance companies, the only difference in their critical illness plans is that the life insurers offer longer tenures, in some cases up-to 50yrs.

Special plans, should we buy?

Some insurers offer age, gender specific policies, such as women (breast cancer, ovarian cancer, cervical cancer etc.), senior citizens. Some also pay 50% sum if the insured’s child has congenital conditions, bonus for child’s education in case of job loss. However, these policies can cost slightly more than the usual policies of critical illness with slightly costly premiums.

CHOICES TO BE MADE

1)    Renewability: Some offer life time renewability, others up to 50 yrs.

2)   Age: Larger covers for older people, owing to increased vulnerability.

3)   Policy Tenure, Sum Insured: Longer tenures offered by life insurance companies, along with higher sum insured.

4)   Survival and waiting period clauses: 30 day survival period from the day or diagnosis, 90 day waiting period from the day of buying of policy. One should survive these periods and shouldn’t die. These may vary from policy to policy though.

5)   Sub-limits: Limits on amounts that can be claimed under certain ailments.

6)   Claims: Procedure and history of insurer is a must know in advance.