Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care and health system expenses, among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement.
A major illness has a debilitating effect on the patientís life, translates to huge medical costs and leaves families struggling to meet daily expenses. In such situations, a Critical Illness Insurance becomes the savior - it guarantees financial security when an individual requires funds for both medical treatment and for supporting the family.
Critical illness insurance is a product where the insurance service provider pays a lump sum to the policyholder when a serious illness is diagnosed. These illnesses are specified on a predefined list as part of the policy. This compensation helps cover hospitalisation/medical expenses, while also helping the patientís family manage day-to-day expenses. Typically, the cover ranges between Rs 1 lakh to Rs 10 lakhs. Higher coverage can be availed if the criteria set by individual insurers are satisfied.
Who needs Critical Illness Insurance?
A critical illness policy is beneficial for those who do not want to take chances with certain health conditions, especially if they have a medical history. Further, primary breadwinners who cannot afford to take a hit on finances from a critical illness usually prefer to take this policy. These plans are also helpful for those who do not have sufficient savings and/or do not have an employee benefits package that covers prolonged sick leave.
Critical insurance health policies can be availed by Indian citizens aged over 18 years and less than 65 years. Applicants who are over 45 years old may have to go through mandatory pre-policy medical checkups.
Additionally, family members (direct relations like parents, children, siblings, and spouse) can also get coverage under a single plan, as specified in the policy. If more than one person is covered under a single critical illness policy, each member qualifies to get cover once during the policy tenure.
Inclusions and exclusions in Critical Illness Insurance Policies
Some common serious illnesses included in the critical illness insuranceís safety net are stroke, paralysis, heart attack, coronary artery bypass surgery, cancer, kidney failure, coma, and major organ transplant (liver, heart, pancreas, lung, etc.)
Critical illness insurance will pay if you get one of the medical conditions/injuries specified in the policy. The policy also explains what the medical conditionís severity must be Ė some policies make smaller payments towards conditions that are less severe. Most policies consider permanent disabilities resulting from illness/injury.
Critical illness insurance policies exclude medical conditions like hernia, dental treatment, gastric, birth control, cataract, overseas medical treatments etc.
Features of Critical Illness Plans
A 30-day grace period is usually applicable post diagnosis and the compensation is paid subject to survival during this period
Pre-medical check-ups are compulsory for those over a certain age, generally 45 years
Day care procedures like dialysis (which takes a few hours) are covered
Although pre-existing diseases are not usually covered, some insurers allow cover for pre-existing diseases after a certain period of uninterrupted premium payment Ė usually 4 years and above
Most insurers tie up with cashless network hospitals, where treatment can be done without paying cash
The sum assured can be changed during renewal, subject to the insurerís approval
The sum assured is paid as a lump sum generally one month after the first diagnosis. This money can be used by the insured as desired
Advantages of Critical Illness Insurance Policy
Tax benefits under Section 80(D) of the Income Tax Act
Easy documentation while making claims
Hassle-free settlement of claims
Numerous options for policy tenure, premium, and sum assured
Option to buy additional riders
Coverage for all pre-hospitalisation expenses up to 30 days
Lump sum paid after the specified waiting period can be used as the insured wishes
The cover amount should be according to age, medical history, smoking (yes/no), current health, treatments costs, recurring costs and future financial liabilities if income loss occurs, high or low risk job, etc. The built-in coverage may vary between policies - some insure accidental death and partial/total disability caused by accidents, while others do not. The sum insured must be higher for the elderly as they are more vulnerable to chronic ailments.
Variations in policies
The type and number of critical illnesses covered differs between policies. Policy documents outline a list of 10-20 specific illnesses covered. Aviva's Health Secure covers 12 ailments, ICICI Prudential's Crisis Cover covers 35, while Bharti AXA's Smart Health covers 20.
Under a critical illness cover, the policyholder usually gets the full sum insured irrespective of what the treatment expenses are and whether or not he/she has been hospitalised. This varies between policies. Most plans have a survival period clause saying the insured must survive a minimum number of days after diagnosis with a critical illness, to make the claim. This is usually 30 days. Some plans do not have this clause, such as ICICI Lombard's Critical Care.
The waiting period clause is a specified period (usually 90 days) from the policy inception, for which the illnesses are not covered. This varies too.
Some insurers put a cap on the amount that can be claimed under certain ailments.
Are standalone policies better than riders?
A critical illness plan can be purchased as a standalone policy, whereas critical illness riders are usually clubbed with health or life insurance plans. A standalone policy is preferable because it offers more flexibility as far as the sum insured and covers are concerned, whereas the sum insured limit under a rider is mostly the same as the base policy. Also, if you have a standalone critical illness plan, it is not mandatory to renew your health/life plan to keep the critical illness cover.
Certain special critical illness plans are customised for special groups like senior citizens and women and covers are provided bearing in mind the groupís unique needs. However, these plans can be slightly expensive.
Some Critical Illness Plans are HDFC ERGO Critical Illness Insurance, Bajaj Allianz Critical Illness Plan, ICICI Lombard Critical Care, Star CriticCare Insurance, and New India Asha Kiran Policy.
A critical illness plan pays for expensive medical treatments and it works out cheaper than an indemnity plan. Critical illness plans can also supplement your health insurance portfolio. Therefore, a combination of critical illness cover and comprehensive health insurance could offer a good balance between coverage and pricing.