Term Insurance with Critical Illness Rider: A Life Savier!

A rider cover can be added to the existing term insurance policy with an additional cost. Critical Illness Rider is a good choice if someone is willing to get higher coverage.

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Rider Benefits with Term Insurance

Term insurance policy is usually recommended for the sole-bread-earner of the family, where a death benefit is ensured in case of a sudden demise of the insured. A critical illness rider policy comes in handy in covering the medical expenses incurred due to health conditions arising out of a critical illness. A regular term insurance policy doesn’t cover the life assured for the same, thus it is highly advised to have a rider cover like critical illness rider.

 Major critical illnesses like cancer, stroke, heart attack, kidney failure, and other diseases are covered under this policy. However, the policyholder is given with the list of critical illnesses that are covered. 

What is a Critical Illness Rider?

A Critical Illness Rider or Benefit is a generally available as an add-on that makes term plans more comprehensive. However, a critical illness cover may also be offered as a standalone plan by some providers.  The critical illness riders are primarily of two types; accelerated and non-accelerated critical illness benefit. In accelerated critical illness rider, there might be a reduction in death benefits (as in the base policy) on the payment of the rider benefit. In the case of non-accelerated critical illness cover, the benefits of the rider are not based on the sum assured upon death. Thus, there is no effect over the death benefits on the benefit of critical illness.

How does a Critical Illness Rider Work?

In case a plan holder is diagnosed with any of the illnesses mentioned in the policy, the Critical Illness Rider comes it to action. It provides a lump sum amount based on the severity, irrespective of the stage of the disease. Major diseases such as cancer, paralysis, kidney failure, heart attack, stroke, heart failure, organ transplant, bypass surgery and lung diseases are a few general inclusions in this list. As per the terms and conditions of the policy, the cover can continue or terminate upon detection of critical illness.

Let’s say, a person has a term insurance cover of Rs 1 crore. Along with that, he has a critical illness rider of Rs 20 lakh. If the person is then diagnosed with a critical illness, only the assured amount for the critical illness rider will be paid which is Rs 20 lakh. 

Features of Critical Illness Rider

Some of the amazing benefits of availing this rider are:

  • Critical illness riders protect against major illnesses.
  • The rider policy might act as a source of income in case of a disability leading to loss of income.
  • Maximum protection can be availed with an additional premium at a nominal cost.
  • Tax benefits are doubled under the critical illness riders.
  • Excluding the base policy benefits, the policyholder can avail of add-on coverage for the medical benefits.
  • With the critical illness rider option in a term policy, expenses related to hospitalizations are covered.
  • At one go, the benefits of a critical illness rider can be availed as a lump sum.
  • The critical illness rider can act as financial support to the policyholder when diagnosed with a critical illness.

Benefits of Critical Illness Rider

A term insurance plan with a critical illness rider offers a range of benefits to the plan holder, such as: 

  • Same Premium Throughout the Term - The premium of term insurance with critical illness benefit remains the same even after the policyholder has been diagnosed with a critical illness. Tax Benefits -The premiums one pays towards a term plan are eligible for tax deductions up to R 1.5 lakh under Section 80C. Similarly, the benefits received are exempt as per Section 10D of the Income Tax Act, 1961. (* Tax benefits ate subject to change. Standard T&C apply)
  • Coverage for Medical Expenses -Considering the ever-increasing cost of healthcare expenses and the prolonged treatment required for critical illnesses, investing in a term plan with a critical illness rider is the best option to avoid burning a hole in one's pocket. The lump-sum amount can be used to get additional coverage for the hospitalization and non-hospitalization expenses, which are not covered under a term plan.
  • Increases the Survival Ratio -Many a times, due to the exorbitant treatment expenses, people with critical illnesses could not get quality healthcare. Investing in a term plan with a critical illness benefit would ensure timely funds to the policyholder to undergo necessary treatment, thereby increasing their chances of survival.
  • Tool for Income Replacement - During the recovery period, one may not be able to earn. This stops the source of income for the family. In such cases, the lump sum payout from the critical illness rider provides the much-required cash flow to meet all their expenses. In some cases, when the plan holder is immobile, these riders also provide a supplementary income.

Critical Illness Rider: The List of Exclusions

The term plan with critical illness rider however doesn’t include every medical expense. The claim cannot be benefitted and gets rejected under certain conditions:

  • There is no coverage against conditions of pre-existing illnesses or any hereditary condition. A policyholder can claim a critical illness benefit only if he is diagnosed with the disease after the waiting period.
  • Once the policyholder is diagnosed with the critical illness, the sum assured will be paid if the insured survives a specific period after being diagnosed. Therefore, it is always necessary to look over the best term insurance plan with a critical illness rider that comes with lower waiting period.
  • Other regular exclusions of term plan.

How to Customize Your Term Insurance Policy with Such Riders?

While purchasing a term insurance policy, individuals have an option to select from various additional rider options such as accidental death rider, an accidental disability rider, critical illness rider, etc. One can easily customize their term plan by selecting the critical illness rider option to keep themselves covered against life-threatening diseases.

Some points to keep in mind before opting for a Critical Illness Rider:

  • The chosen sum assured amount under the term plan is paid only in the event of the insured's demise or total permanent disability.
  • The insured gets paid a benefit amount that equals the amount of critical illness cover opted for. The insurer will pay this amount upon the first diagnosis of the illness after a minimum survival period.

To Conclude!

With the increase in the number of deaths due to critical illnesses, it is inevitable to avail a rider plan such as critical illness cover to stay financially protected. These policies work as a financial shield throughout the tough times and boost the basic policy coverage.

Written By: PolicyBazaar - Updated: 19 July 2021
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