Critical Illness Plan: Why Should You Buy it?

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As a smart investor and financial planner, most of us go for life insurance policies to financially safeguard our loved ones or pay off the debts in case of mishap like death.

However, very few of us plan about critical situations like illness that may stop you from working and ultimately prevent your regular flow of income.

The advances in Medicare and healthcare have helped in improving the life expectancy, which means more people are surviving illnesses that might have proved fatal for their predecessors.

However, treatment of such illness comes with its own share of expenses and can put a big dent on your savings.

Critical illness insurance plans in India are financial products made for such situations.

They provide financial support where medical and long term care costs put pressure on family’s finances till the time patient recovers.

What is Critical Illness Insurance Plan?

The critical insurance plan is a long term plan that covers specific serious illnesses mentioned in the policy terms. In case any illness strikes, the policy will give lump sum compensation that helps you to pay for:

• Hospitalisation costs
• Cost of medication
• Recuperation aids
• Day to day expenses like school fees, EMI’s and bills
• Any debts due to illness
• Any lost income due to decreasing ability to earn

The main underlying criteria for claim is the insured person needs to survive for at least 30 days from the date of diagnosis of critical illness for the claim to be admissible. This is in addition to the initial waiting period of 60-90 days that most insurance policies follow.

Learn More: Critical Illness Insurance - A Quick Guide

What do critical plans in India cover?

Some of the illnesses covered by these plans are heart attack, multiple sclerosis, stroke, cancer, major organ transplantation, kidney failure, paralysis etc. With competition increasing, insurers are adding more illnesses like major burns, deafness, loss of speech etc. Typically, the policy documents outline the illness that will be covered, and this may vary from company to company. HDFC Ergo, provides benefit against 8 illnesses whereas MAX BUPA, Bharti AXA and Religare include 20 illnesses. ICICI Lombard and Tata AIG covers 9 and 11 illnesses respectively.

What critical illness insurance doesn’t cover?

The major exclusions across all critical illness insurance policies in India are as follows:

• Any pre-existing conditions, diseases or injuries at the inception of the policy cover
• Acquired Immune Deficiency Syndrome (AIDS) and related diseases/illness related to HIV
• Joint replacement, unless due to accident
• Critical illness due to genetic disorder
• Treatment following use of drug or liquor or intentional self-injury

How much does critical illness insurance cost in India?

The coverage under critical illness plan varies widely from a minimum amount of INR 2.5 lakhs to INR 20 lakhs offered by most insurance companies. Some companies such as Bajaj Allianz and Religare offer a coverage of INR 50 lacs and INR 1 crore also. Typical premium for a 40 year old for a sum assured of 5 lacs will range somewhere between INR 2500 to INR 4000 for most insurers. A detailed comparison can be done by using the Policybazaar website.

Should you buy critical illness insurance?

The major factors that define the need of critical care are:

  • Work pressure, unmanaged lifestyle and food habits have made the younger generation in India susceptible to lifestyle diseases like diabetes, heart attack, obesity, and hypertension
    1. Irrespective of your profession (service or business), any pause in the flow of funds can spin your finances out of control
    2. Treatment for critical illness is expensive. Own funds plus health insurance plans may not be sufficient enough to meet the expense

The critical illness cover also qualifies for tax exemption of upto INR 20,000 under section 80D.
After evaluating the needs, you should also perform a thorough critical illness insurance comparison and select the one that fits you. Few important things to be considered here are details of illness covered, coverage amount, ease of claim procedure and the claims approval percentage of the insurer.

A normal health insurance plan (mediclaim policy) can provide cover up to a certain extent. However, it may not be enough to replace your income or living standard if illness strikes. It is vital to have a critical illness cover as a top-up to your own or employer provided health policy. For instance someone in the age group of 25-30 with a 5 lakh medical cover can add a 10-15 lakh critical illness insurance cover to protect himself/his family against all odds.

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