Critical Illness Insurance
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Critical Illness Insurance
Critical illness insurance, otherwise known as critical illness cover or a dread disease policy, is an insurance product in which the insurer is contracted to typically make a lump sum cash payment if the policyholder is diagnosed with one of the specific illnesses on a predetermined list as part of an insurance policy. A critical illness insurance policy covers the insured against life-threatening critical illnesses such as cancer, heart attack, renal failure etc. This insurance policy provides coverage in the form of a lump sum at the time of diagnosis of a covered illness, subject to crossing the survival period.
The lump sum is the sum insured can be used for the treatment expenses and is not related to the actual expenses incurred for treatment. If you are already covered under a comprehensive health insurance plan which can be a group cover from your employer and need extra insurance for life threatening situation then choose critical illness plan. Do not second guess as why buy another insurance and clutter coverage? In case if you are diagnosed with a critical ailment which may require specialized treatment and your basic health plan would consider that as a limit on doctor’s fee and wont cover for full medical costs. In such cases you may avoid paying from your pocket if you have already purchased a Critical Illness Policy. These plans can cover for cap on specific expenses such as medicines, intensive care unit or prosthetic. Diseases like Cancer, Multiple Sclerosis, Paralysis, Coronary Artery Bypass Surgery, Major Organ Transplant, Primary Pulmonary Arterial, Hypertension, First Heart Attack, Stroke, Kidney Failure, Arota Graft Surgery, etc can be covered by insurers under these plans.
Key Highlights
Pays for the expensive treatments and much cheaper than an indemnity plan.
These plans offer fixed benefit coverage and insured will get full sum insured irrespective of whether hospitalized or not.
Most plans may have survival clause and the insured must survive for at least 30 days after diagnosed with critical illness to file claim.
The details of coverage and number of critical illnesses covered can vary from insurer to insurer.
Balancing between comprehensive health insurance policy and critical illness plan can give a good coverage.
Critical illness insurance was originally sold with the intention of providing financial protection to individuals following the diagnosis or treatment of an illness deemed critical. Critical illness should ideally be purchased by individuals along with a life insurance or term assurance policy or even with a standard health insurance cover. The claims received could be used to:
pay for the costs of the care and treatment;
pay for recuperation aids;
replace any lost income due to a decreasing ability to earn; or even
fund for a change in lifestyle
This insurance can provide financial protection to the policyholder or their dependents on the repayment of a home loan due to the policyholder contracting a critical illness condition or on the death of the policyholder. In this type of product design, some insurers may choose to structure the product to repay a portion of the outstanding home loan (Credit Shield) debt on the contracting of a critical illness, whilst the full outstanding mortgage debt would be repaid on the death of the policyholder. Alternatively, the full sum assured may be paid on diagnosis of the critical illness, but then no further payment is made on death, effectively making the critical illness payment an ‘accelerated death payment’. Some employers may also take out critical illness insurance for their employees. This contract would be in the form of a group contract and has become an essential strategy used by employers around the world to both protect their employees financially as well as attract more employees to consider working for the company.
The table below will shed some light on the need for every individual to have a Critical Illness plan, especially given the prevalence of such a lifestyle for the average Indian:
| Critical Illness | Data Points (India) | Some of the Causes |
|---|---|---|
| Heart Disease | Around 200 deaths/lac of population Estimated that by 2030, 1 out of every 3 patients will be from India Estimated to add around 1.6 million patients every year In India 4 persons in the age group of 30-60 succumb every minute | Sedentary Lifestyle Smoking / Excessive Alcohol Cholesterol / Hypertension / Diabetes Obesity Genetics / Family History Stress |
| Cancer | Death from some type of cancer every 3 minutes Almost 70% of cancer patients in India between 30-70 years New Cases account of around 1.2 million every year Expensive, uncontrollable treatment expenses | Tobacco Excessive Alcohol Pollution Exposure Ultra Violet (UV) Ray exposure consistently Sedentary Lifestyle Genetics / Family History |
| Alzheimer’s Disease | Atleast 5% of the population suffer some form of this disease upto 65% of age Early detection age has come down to 45-50 years from above 60 a couple of decades ago India will be home to around 14.3 million patients in the next 25-30 years Expensive treatment which is ongoing | Age Family History Head Injuries Cardiovascular Problems |
| Kidney Ailments (Chronic Kidney Disease – CKD) | 150-230 persons per million suffering from End Stage Kidney Disease (ESKD) Health Ministry estimates atleast 800 persons/million have some health issues related to the Kidney Upto 275,000 persons require Renal Replacement Therapy (RRT) every year Dialysis Expenses range between ₹20,000 – 30,000 per month | Diabetes Lifestyle diseases Smoking Lack of fluid intake Too much consumption of salt leading to Hypertension |
| Stroke | Prevalence of Strokes in India range between 119-145 per lac of population Prevalence higher in Rural areas than Urban areas 1.8 million (18 lacs) people suffer a stroke in India every year Leading cause of Disability apart from being one of the highest causes of death | Salt Intake/Hypertension / Blood Pressure Sedentary Lifestyle Stress |
Do’ What are the factors to keep in mind while buying a Critical Illness Plan?
What are some of the key Critical Illnesses Covered?
Some of the most covered Critical Illnesses across the insurance companies in India include:
- Cancer
- First Heart Attack
- Open Heart Coronary Artery Bypass Grafting (CABG)
- Open Heart Replacement Or Repair Of Heart Valves
- Coma
- Kidney Failure
- Stroke
- Major Organ Transplant
- Bone Marrow Transplant
- Permanent Paralysis Of Limbs
- Motor Neuron Disease
- Multiple Sclerosis
- Aplastic Anaemia
- Bacterial Meningitis
- Loss Of Speech
- End-Stage Liver Disease
- End-Stage Lung Disease
- Fulminant Viral Hepatitis
- Major Burns
- Muscular Dystrophy
- Alzheimer’s disease
- Aortic surgery
- Aplastic anaemia
- Benign Brain tumour
- Blindness
- Deafness
- Paralysis
- Parkinson’s disease
- Severe burns
This list is not an exhaustive list of all covered Critical Illnesses by all insurers. Insurance companies cover different critical illnesses under different plans within their product offerings. Different insurance companies also have a different set of Critical Illnesses they cover…please go through their covered illnesses before deciding on the optimum plan for your requirement.
So what are some of the Features of Critical Illness Insurance Plans?
There are quite a few important features of Critical Illness insurance plans that one must note: Critical Illnesses (CI) Defined – The most important feature is that under the CI Plan Coverage, there are defined number of illnesses only covered. All insurance companies provide a list of the illnesses/ailments that are covered so that the applicant will be aware of what’s covered. Kindly note that any ailment/illness other than those named/listed by the insurance company will not be covered. Some important ones that all insurance companies cover include First Heart attack, Cancer, Kidney Failure, Stroke etc.
Survival Period – Every CI policy comes with a survival period benefit, this means that post detection of the critical illness, the insured will need to survive this period in order to ensure the claim becomes payable. This is normally 30 days. Hence for example, if one has suffered a Stroke, he/she will need to survive 30 days and then the claim is payable. This is important to note, so incase the insured unfortunately passes away during the survival period, then there is no claim paid by the insurer.
Income Tax Benefits under a CI Insurance Policy – The policyholder can avail tax deductions under the Income Tax Act, 1961. Tax exemption can be claimed upto ₹15,000 under Section 80D of the Income Tax Act, 1961. Senior citizens can avail tax benefit up to ₹20,000 under the same section.
Single Lump-sum Payment – The insurer pays the sum insured as a single lump sum payment for the treatment of covered illnesses, subject to crossing the survival period. What is important is that since this is a fixed benefit plan, the sum insured is p aid in full, irrespective of the expense incurred. For example, if the Sum Insured of the policy is ₹5 lacs and the treatment expenses are only ₹3 lacs, the entire SI of ₹5 lacs will be paid to the insured.
Loss of Job / Income – Following a critical illness, it is most likely that the insured may need to stay away from work for a period of time or may even have to give up his/her job based on their health condition. Hence the claim is used as an income replacement for the insured.
Simple Claim Processing – The documentation at the time of a claim under the plan is very minimal given that the policy covers defined illnesses/conditions for which supporting documentation needs to be provided for the claim to be settled The claim can be easily settled based on the diagnosis report(s) submitted by the insure
Policy Termination on Claim Payment – Unlike a regular Indemnity based health insurance plan, in a CI policy, once the claim is settled on detection of a covered critical illness and crossing the survival period, the CI policy will automatically cease to be in force.
What are the factors to keep in mind while buying a Critical Illness Plan?
There are quite a few factors to keep in mind while investing in a Critical Illness Plan:
| Factor to be kept in mind | Remarks |
|---|---|
| Should you buy a Standalone Critical Illness Insurance Policy or Critical Illness Insurance Rider? | A standalone CI has a higher premium when compared to a rider, since it offers more comprehensive coverage when compared with the latter. |
| Number of Critical Illnesses Covered (Range from 6 – 40) | The insurance company lists the exact illnesses covered under their plan. Important to note that no other illnesses/ailments will be covered |
| Sum Insured | There are CI plans which offer coverage for even upto ₹100 lacs, one must opt for an optimum sum insured depending on their age, family history, pre existing medical conditions etc |
| Age of Insured | This is an important factor which determines the coverage / premium for the CI plan. |
| Survival Period / Waiting Period | All CI plans come with a survival period, normally 30 days, post which claims are settled. There is also a mandatory waiting period of 30 days from the start of the policy during which no claims are payable at all. |
| Maximum Entry Age | Each plan has a maximum entry age after which the applicant will not be able to apply for a CI policy, this is normally 60-65 years. |
Health Insurance Plans vs Critical Illness Plans
These type of plans are also known as Fixed Benefit plans (Critical Illness) and Indemnity Based plans (Health Insurance) and the table below highlights the important differences between the two plan from an individual’s perspective. It is recommended that since both these plans are complimentary to each other, every individual should ideally have both plans for their protection.
| Critical Illness Plans | Health Insurance Plans |
|---|---|
| Pays a lumpsum upto Sum Insured on the occurrence of the covered event. Even if the actual expenses are less than the Sum Insured, the amount is settled in full. | Reimbursement/cashless settlement only upto the actual expenses incurred irrespective of the Sum Insured |
| These plans cover only a limited / fixed set of benefits which are defined in the plan | Most indemnity based health insurance plans offer wide ranging coverage for sickness to the insured |
| Policy / Plan expires in the event of a claim and the Sum Insured being settled to the insured | Policy continues even after a claim is paid, coverage will remain upto the balance remaining Sum Insured (or back to 100% SI with Restore Benefit plans) |
| Fixed Benefit plans normally do not have a co-pay or deductible. Full Sum Insured settled to the insured | Indemnity plans have a co-pay / deductible based on the plan chosen by the insured |
| Some Fixed Benefit Plan like Critical Illness have Survival periods (normally 30 days) after which expenses / SI becomes payable | No Survival Period. Expenses from Day 1 of hospitalisation are payable under this plan. |
| Premium for these plans are relatively higher | Premiums based on coverage/SI chosen, but cheaper when compared to Fixed Benefit plans |
| Normally chosen for covering Critical or Life Threatening ailments | Purchased to cover more routine medical expenses following a sickness/accident |
The WWWWWH of Critical Illness Cover?
| Who Should buy CI? | Ideally everyone needs this policy but let’s look at a few customer profiles:
|
| Why Should you buy CI? | Given today’s lifestyle led by most Indians and given that we are unfortunately leaders in the world in terms of diabetes, cardiac issues, hypertension, increasing stress levels, pollution, having a CI policy to protect individuals financially is important |
| When Should you buy CI? | At the earliest given opportunity, but most definitely if one is in the age group of 35-65 years. |
| What CI policy Should you buy? | Do a market survey of the products and opt for a plan with the following:
|
| Where should I buy CI from? | If one would like to review and compare all the available CI plans in the market, visit a comparison website that provides information specific to Critical Illness plans. |
| How should I buy CI? | One can purchase the same online following a simple three step process:
|
Critical Illness Mediclaim
TATA AIG
CritiCare is a Critical Illness insurance policy, which provides coverage for a set of 11 Critical Illnesses & Surgeries
Bajaj Allianz
A critical illness plan means you can insure yourself against the risk of serious illness in much the same way as you insure your vehicles.
Max Bupa
Health Assurance covers as many as 20 Critical illness and provides guaranteed cash benefit equivalent to sum insured on diagnosis.
Care(formerly Religare)
Care(formerly Religare) health insurance has designed – a comprehensive cover for as many as 20 Critical Illnesses along with Personal Accident cover.
Reliance
Reliance Critical Illness policy will offer you the health coverage for 10 critical illness.
Cholamandalam
Chola Critical Healthline Insurance is a fixed benefits plan offering coverage for a specific list of critical illness.
HDFC ERGO
HDFC ERGO offers Lump Sum Benefit on first diagnosis any of 8 critical Illnesses
Universal Sompo
Universal Sompo can help in reducing financial burden and concentrate on getting better treatment on diagnosis with Critical Illness.
SBI
The Critical Illness Insurance Policy of SBI General covers you against thirteen major critical diseases.
IFFCO Tokio
Most illnesses arrive unannounced and on today’s day and age, critical illnesses seem to be more prevalent than ever.
