What is Critical Illness Insurance

Do you really need critical illness cover when you already have a comprehensive health insurance policy and a healthy life cover? What are the advantages and features of a good critical illness plan?

First let’s understand the nature of a critical illness insurance policy.

Critical illness is popularly sold as a rider to your health plan and also separately as a standalone policy. The premium you pay for critical illness insurance provides you financial cover for a specified list of illnesses and conditions.

Fixed benefits

These plans are mostly fixed benefit plans, which means if you are diagnosed with one of the diseases or conditions specified in the policy document, you will receive the sum assured. Unlike other health insurance plans, the claims payout is not based on your actual medical expenses but is a fixed amount you will get regardless of your expenses

For this reason, a critical illness cover is a healthy addition to your existing health plan. Traditional health policies cap specific expenses such as doctor’s fees, hospital room rent, ICU, etc. So, even if you have a large enough cover, you must ensure that a specific expense does not exceed the cap or you will have to pay for it.

You can use the sum you receive from a critical illness plan any way you like – for treatment, as income replacement, to pay off debts etc.

Making the right choice

• Separate or rider? Standalone policies offer great flexibility and larger covers. Riders are usually offered to the same extent of the sum assured of the main policy. So if you have a health cover of Rs 2 lakh you can buy additional critical illness rider of Rs 2 lakh. But you can buy a much larger cover with a standalone policy,

• More or less? Good medical treatment is expensive. In addition, a critical illness could mean loss of income. Consider these factors while choosing the amount of cover you need

• Make sure the plan you buy covers illnesses that run in your family

• The Exclusions: Most critical plans will have survival (the policy holder must survive a certain period, usually a month, before becoming eligible for the claim) and waiting period (illness diagnosed with a three-month period of buying the policy are usually not covered).

• Tax treatment: All critical covers enjoy the same tax treatment as other health insurance plans – the premium you pay (up to Rs 25,000) is deductible from your income under section 80D of the Income Tax Act

A good critical illness plan can indeed be a healthy addition to your health insurance because you can turn to it when you will need it most.