With new diseases coming to the fore, their treatments being discovered and the rising cost of medical treatments, we are at higher risk of having some serious illness than ever before. Hence the need for critical illness insurance is growing day by day.
In the recent times, term and health insurance have gained a lot of popularity. However, same is not the case with critical illness insurance. There is lack of awareness about the product and how it works. People also think that their regular health insurance is enough to take care of all types of illnesses. Cost of critical illness insurance is also a major deterrent.
But critical illness insurance can prove to be life saver for those who are diagnosed with a serious and long-term illness which requires expensive treatment. A critical illness insurance policy provides a huge lumpsum benefit on the diagnosis of any critical illness covered under the policy. Hospitalisation is not required and benefit does not depend on the cost of treatment. And this amount can be used by the policyholder to take better treatment and care, to pay regular bills or to replace the loss of income caused to long term critical illness.
Some people are at higher risk of falling critically ill than others. People with a family history of critical illness, people in high stress jobs or individuals above 45 years of age are more prone to critical illnesses. Even individuals who are sole bread winners of the family must consider buying critical illness as their families solely depend on their monthly income for financial needs.
But buying critical illness insurance can also be tricky. Life insurance companies offer critical illness insurance as riders along with term insurance or endowment plans. General insurance or health insurance company offer critical illness insurance either as a rider along with regular health insurance plans or as standalone products.
Buying critical illness cover as a rider along comes with many limitations. The cover amount and premium for CI rider should not exceed the cover amount and premium of base policy respectively. There is restriction on the term of CI rider depending on the term of base policy. On the other hand, buying a standalone critical illness cover from a health or general insurance company comes with no such restriction. These plans are more flexible in terms of cover amount and duration of the policy.
Deciding on the cover amount is important. While there is no rule of thumb here, one can link it with his annual income. A cover amount equal to 4 to 5 years of annual income looks good. So a person having an annual income of Rs. 5 lakh can go for a cover of around Rs. 20 lakh. It can help one sustain financially for a few years in case of loss of job due to critical illness. While buying a higher cover is sounds better, it can get really expensive. Also the insurer might restrict you from buying a very high critical illness cover depending upon its underwriting norms and your medical condition.
Common critical illness products in the market cover around 15 to 20 illnesses which is not comprehensive. These plans cover serious illnesses like cancer and renal failure. But they not cover illnesses like Alzheimer’s disease or Parkinson’s disease. But some insurers have now launched CI products that cover 64 or even up to 99 illnesses. These are obviously more comprehensive and provide coverage against critical illnesses. But such plans can be expensive.
All critical illness insurance products have layered benefits where claim amount paid by the insurer depends on the severity of disease. A certain condition might just make one eligible for just say 25% or 50% of the initial cover amount. A certain more severe condition of the same illness might pay 100% of the cover amount. This will entirely depend on the diagnosis of the illness where the severity would be mentioned.
So it becomes important to read the product brochure and other sales material in detail to know what it offers. This will ensure that one knows exactly what he is going to buy. Some sales material might not contain all the details of and list of what is covered because of the complex nature and long list illnesses covered under the plan. But the policy document contains the entire list of coverages and exclusions in detail.
One should read the policy document once to ensure that he knows what the product offers. If someone is not happy with any of the terms and conditions, they can return the policy within the free look period.
