5 Essential Tips to buy the Best Critical Illness Policy

Health Insurance plans give you protection from unexpected financial expenditure that arises due to sudden illness, accidents and other health related issues. The coverage and policy premiums vary based on different parameters like age, gender, family medical history, basic health and habits of the policy holder and locational or occupational hazards, if any. Health benefits could be extended over the basic health insurance plan by certain add-on in excess to the base policy as required by individual need and preference.

Health Insurance Policies Types

In India, health insurance is broadly classified under 3 types:

·         Critical illness policy -- This is different from general health insurance policy since only certain pre-specified illnesses are covered under critical illness policy rather than more general health and accident coverage. Moreover, the lump sum amount is paid to carry out treatment once the diagnosis is done decisively. General health insurance does not include certain diseases and to overcome this shortcoming, there is the need to buy the critical illness cover policy. This is an add-on or rider on top of your general health insurance policy. Some of the most common critical illnesses that are covered under this plan are heart attack, stroke, cancer, blindness, terminal illness, paralysis, organ transplant etc.

·         Hospitalization plans – This plan covers the medical and hospitalization costs of the insured. Coverage is up to the sum insured. Based on the person(s) insured under the policy, the plan can extend to single individual, all individuals in the family separately or as a family floater. For example, for a family of 4 people, there can be 4 individual health insurance policies of 1 lakh each. Or there can be a family insurance plan of 4 lakhs where each member is insured up to 1 lakh individually. They might have a family floater plan of 4 lakhs where any and all members can use any amount not exceeding a total of 4 lakhs for the entire family.

·         Daily Cash benefit plan for hospitalization – Here the insured will receive an agreed up on daily payment irrespective of the actual cost incurred during the time the person is hospitalized. If the daily pay-out is more than the actual cost of hospitalization, that works as an added income or benefit for the insured.

While shopping for a critical illness policy you need to look for the following:

·         Current Financial situation – Do a homework regarding your financial position. If you can afford to face the financial challenges in case there is a critical illness, then you can go for a smaller coverage under critical illness plan. Also, keep in mind that health related expenditure are always on an upward move, so health insurance plan should be done accordingly.

·         Current health situation– Your present health condition will matter when it comes to shop for critical illness policy.  Obesity, unhealthy habits of smoking and drinking pose higher risk and exposure to certain critical illnesses in future. And these add to the cost of premium exactly the same way it does for general health insurance. Taking critical cover plan early in life when you are healthy is a better idea.

·         Current Family Set Up – If there are senior citizens or aging parents in your family, it is imperative to get covered under Critical illness policy since there is higher chance that health emergency can occur and put a financial burden on you.

·         An add-on that will complement the general health Insurance policy – Your Critical illness policy should be complementing the general health Insurance plan that you already have so that when both combined, they optimise the coverage. That becomes most cost effective.

·         Go for a more comprehensive coverage – Shop for the different Critical Illness plans offered by different insurers. The list of covered illnesses varies. Make sure the plan offers the coverage for most critical illnesses. Also the terms and conditions are important to understand the inclusions and exclusion.

·         Look for Claim Settlement Ratio and No Claim Bonus – The higher the percentage of the claims settlement by the insurer, the better is your chance of getting reimbursed for your illness cover. Moreover, on a particular year, if there is no claim, then some insurers reward you with certain percent of premium. While looking for a policy, look for these from the insurer. 

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Why Critical Illness is needed with Your Basic Term insurance?

Do you know the benefits of a term insurance plan? Besides the low premiums, which are an obvious favorite, the plan fulfills the most basic life goal – income replacement. By providing a combination of a high Sum Assured and cheapest premiums, a term insurance plan ensures financial security for the family if the insured dies pre-maturely. As such, a term plan is very popular among many of us.

Have you invested in a term insurance plan? Great! Have you included a Critical Illness Rider in your Term plan?

Riders, like the insurance plan, are also a very beneficial component. It is mostly because of our ignorance that we overlook riders when we buy a term plan. Take the instance of the Critical Illness  itself. Despite being beneficial, how many of us have included it in our term plan? Not many. So, let us put our ignorance to rest and understand what a Critical Illness Rider is and how it is important.

What is a Critical Illness Rider?

Riders are additional benefits which can be added to our basic insurance plan for increased benefits. It covers specific critical illnesses. If we suffer from any of the covered critical illness, the rider pays us an additional Sum Assured in lump sum. This benefit is paid simply on diagnosis of our illness irrespective of whether we die or avail treatment for the same.

What is the importance of including the Critical Illness Rider with our Term Insurance Plan?

·         Critical Illnesses are common and financially difficult

Do you know why Critical Illnesses are called so? These illnesses are severe, fatal and chronic. They involve complicated medical treatments and procedures. Do you know the cost of such procedures? Let’s just say that the costs are magnanimous. Juxtaposed to this, critical illnesses are also becoming very common nowadays. Whether you talk about cancer, stroke, heart attacks or organ failures, critical illnesses are on the rise. This deadly combination of increasing illnesses and high medical costs is a curse for us, both physiologically and financially. Critical Illness Riders, by providing financial support, help in taking care of the financial aspect of the illness which would otherwise be difficult for us.

·         The rider increases the scope of cover

Our term insurance plan pays the benefit only in case of pre-mature death. What happens if we are merely diagnosed with an illness which might not cause death? Would the term plan pay? No, it won’t. But, a critical illness, though not fatal, does require considerable funds for its treatment. A Illness Rider comes into the picture here. Since the rider pays the benefit on mere diagnosis of the ailment, it provides us with the required funds for the treatment of the illness. As such, the rider increases the scope of coverage.

·         The rider helps in replacing your income

When we suffer from a critical illness, we are forced to take a break from work. As such, our income stops. The benefit paid by the rider can be used to replace this income and meet the day-to-day living expenses of us and our family.

·         The rider saves additional tax

The premiums you pay for your term plan is exempt from taxation under Section 80C. If you also include a Critical Illness Rider, you get an additional tax exemption under Section 80D. Thus, the rider helps you in claiming additional tax exemption.

A critical illness rider, thus, has various benefits. These benefits can be yours if you include the rider in your term plan. If you are worried about the additional premium outgo, relax! Rider premiums are minimal. By paying a fraction of your term insurance premium, you can add the rider to your basic plan. Do the math yourself. Do a term insurance comparison, or a Term insurance with return of premium comparison both with and without the rider and you would understand the cost-benefit aspect of the Illness rider. With so many benefits promised by the rider at the lowest possible cost, isn’t it prudent to add it to your term plan?

Source: Why Critical Illness is needed with Your Basic Term insurance?