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Critical Illness Insurance – A Must Have

As we cruise along, busy with our daily lives and routine, sometimes we wake up to depressing news about a dear family member, friend, colleague or acquaintance being diagnosed with a critical illness. Gloom descends on us as we think of how life has changed suddenly for that person and his family. 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 crowdfunding requests on 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 is below taken from Economic Times dated May 29, 2017, is self-explanatory with regards to the financials needed to fight a critical disease.

cost critical disease

cost critical disease

We need to pause and think whether we are in a position to fund the expenses should we fall prey to a critical ailment. These are very unsavory thoughts but nevertheless something that needs to be thought of and planned for in advance. Also, diseases such as Blood Pressure, Cardiac issues, and Diabetes are on the rise in India and more and more people are getting diagnosed with these diseases at very early ages thanks to the fast, stressful and sedentary lifestyle that many of us follow. As responsible adults, we need to plan for this contingency today. And how do we do that? Probably the answer lies in Critical Illness Insurance.

What is Critical Illness Insurance?

Critical illness insurance is a defined benefit plan which aims at providing a fixed lump sum amount (sum assured) on the diagnosis of any of the covered diseases or for certain covered procedures/surgeries/transplants.

Features of Critical Illness Insurance

  1. It is aimed at providing a 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 by the insurance company.

  1. Unlike a health insurance policy which is an indemnity policy and reimburses only to the extent of expenses incurred, a Critical Illness cover pays a fixed amount (sum assured) irrespective of the actual expenses borne for treatment. This amount can be used for any purpose by the insured be it treatment expenses, recuperation expenses, household expenses, paying off debts, to make good the loss of income caused by inability to work etc

  1. Once the sum assured is paid out, the critical illness coverage/policy comes to an end.

What is the Waiting Period?

Most insurers have a waiting period of 90 days from the start of the policy i.e. critical illnesses which are diagnosed within 90 days of policy issuance are not covered.

For pre-existing ailments, most insurers have a waiting period of 48 continuous months from policy issuance.

Most Commonly Covered Critical Illnesses

The commonly covered critical illnesses are as under. This is an indicative list and not exhaustive.

  • Cancer
  • Heart Attack
  • Cardiac diseases
  • Multiple sclerosis
  • Stroke
  • Major organ transplantation
  • Coronary artery bypass surgery
  • Aorta graft surgery
  • Kidney failure
  • Heart valve replacement
  • Paralysis
  • Parkinson’s disease
  • Alzheimer’s disease
  • Benign Brain Tumour
  • End-stage liver diseases

Most insurers cover 8 to 20 critical illnesses and even more. Apollo Munich’s Optima Vital Plan covers 37 diseases including loss of speech, blindness, motor neuron disease etc. Max Bupa’s Criticare plan covers 20 critical diseases.

Why Do You Need to Supplement Your Health Insurance Policy with Critical Illness Cover?

The average health insurance policy in India is for Rs 2 lakhs. This will be of hardly any help to tackle critical ailments. Further, health insurance policies have various sub-limits for certain procedures, tests, doctor’s consultation etc which may result in you paying a sizeable amount from your pocket. Hence the need to have dedicated critical illness insurance.

Who Should Buy Critical Illness Insurance?

Insurance experts suggest that those who are approaching age 40, those in highly stressful and demanding professions, those with a family history of cancer and hereditary diseases should definitely consider a critical illness cover. Buying early helps as health risks are less and so will be the premium. Also, it is best to consider a plan which has low waiting periods, covers a good number of diseases and where the renewability age is high or lifelong.

The below table depicts for a Male, the annual premium for a critical illness insurance cover (20 diseases) for a sum assured of Rs 10 lakhs at various ages:

Age

Annual Premium

45

Rs 8527/-

40

Rs 5503/-

35

Rs 3243/-

How to Avail Critical Illness Cover?

Critical illness insurance comes in 2 variants i.e. it can be opted for as a critical illness rider with your life insurance policy/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 decision:

Parameters

Critical illness rider

Standalone critical illness policy

Sum Assured

The rider sum assured cannot exceed the sum assured of the base plan.

Flexibility to choose the desired sum assured, beneficial for those seeking higher cover due to susceptibility to certain diseases on account of hereditary factors, lifestyle etc.

Renewal due date

Coincides with the base plan renewal due date. It is 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 due to health issues and advanced age.

Policy term

Cannot exceed that of the base plan. Thus, can be without a cover during advanced age when chances of diseases are higher. 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 fewer diseases compared to a standalone plan. 8-10 diseases covered (varies among companies)

Covers 10-37 diseases (varies among companies) thus providing wholesome cover.

Conclusion:

A healthy lifestyle combined with good eating habits and regular exercise can help keep many diseases at bay. However, certain diseases can still crop up. This is where a Critical Illness cover can come handy. You can at least be relieved of the financial stress and focus all your energies on conquering the ailment. Also, factor in medical inflation while choosing the sum assured.

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