Stressful life and unhealthy lifestyle have increased the chance of people suffering from critical diseases. Any serious health condition that has a negative effect on the overall standard and lifestyle of people is called critical illness. Various reports have estimated that out of every four Indians, at least one is at the risk of these life-threatening diseases under the age of 70 years. However, living habits are not the only reason for getting these illnesses. Sometimes, the reason can be either heredity or increasing age too.
Critical illnesses often demand extensive medication, treatment and in some cases, even expensive surgeries. These require paying heavy medical expenses which include hospitalization costs, rent for the room and other bills. Additionally, you also need to have sufficient funds for taking care of different family needs which can be met easily through a critical illness insurance. However, the most concerning issue that arises in such situations is – the loss of income. These illnesses compel you to be bedridden, and hence, you are not able to work and keep the cash flowing in.
How is a Health Insurance Different from Critical Illness Insurance?
The main difference between a Health Insurance plan and a Critical Illness (CI) policy is that – the former only covers all the hospitalization costs.
Medi-claim or regular health insurance doesn’t cover any further family expenses which might arise due to the illness. Moreover, there is no reimbursement for any treatment charges, unlike CI policies. Additionally, health insurance only covers some diseases and accidents – not critical diseases. However, it does include some illnesses which are existing or loss of health due to maternity. Also, the policyholder can reimburse all the costs incurred due to admission in the hospital by producing those bills.
Health insurance offers some cashless facilities that can be availed at hospitals that have partnered with the insurer. Under this, the bills of the insured are paid to the hospital through the company itself. There is a waiting period of one month and can be renewed after the annual period of one year is over. The amount of coverage paid to the borrower depends on him/her. The amount is usually around 5 Lakhs. Although, some banks also offer coverage of up to 80 Lakhs.
Critical Illness Insurance
Whereas, under the CI policy, the borrower gets a lump sum cover when a critical illness is diagnosed. So, the borrower has the freedom to utilize this money in whichever way he wants. Moreover, there is no concern of hospitalization costs or any such expenses. Whether the borrower is admitted in hospital or bedridden – all the treatment expenses are covered under CI. Since the borrower gets the amount at the time of diagnosis, the risk coverage is limited. Also, unlike health insurance, you don’t have to show the original copies of bills – a photocopy would suffice. The amount on this policy is exempted under taxation.
Unlike health insurance, CI can be taken for a period of up to 20 years. The waiting period in CI is generally more which is up to three months. The diseases covered in health insurance plans are not included here. The amount of the risk coverage can be anywhere between Rs 5 Lakh to 50 Lakh.
The high-risk ailments covered under critical illness list include:
|Illnesses Included in CI List||Illnesses Excluded in CI List|
|Replacing or repairing of heart or its valves||Any disease which has been caused either due to prolonged usage of tobacco, drugs, or alcohol.|
|Severe Coma||Any diseases caused by disability from birth.|
|A stroke is happening for the first time.||Any health conditions caused by giving birth – includes C-section.|
|Any stroke which leads to some lifelong repercussions.||Sexually transmitted diseases like HIV|
|Undergoing dialysis due to the failure of kidney||Defense operations like fighting in a war, military duties, or terrorist attacks.|
|Severe cancer – lung, throat, breast, liver etc.||Any surgeries or dental treatments.|
|Limbs getting paralyzed resulting in long-term symptoms.||Treatment took due to infertility, or any hormonal replacements, and any surgery for reproductive purposes.|
|Any neurological disease is having symptoms which are permanent.||Any treatment which has not been taken in the country|
|Multiple Sclerosis||If death occurs within the first month of being diagnosed with a disease.|
|Meningitis and Anaemia (Aplastic)|
|Losing speech or hearing power.|
|Liver or lung diseases encountering the last stage|
Who Can Buy CI?
CI policy is an excellent option for people who are employed and have a regular income. Plus, the rise in the cases of many such dangerous diseases provides a strong reason to buy this policy. Due to this, the equipment and various machines used for treating such illnesses cost too high – leading to expensive surgeries. Significant surgeries like angioplasty and others can go up to 4 Lakhs. If there is a lack of income or you don’t have enough money saved in your account to cover such expenses – you should plan to buy this policy. Some people also have medical insurance already purchased. Many people don’t know that health insurance and critical insurance both can be purchased separately.
The primary advantage of buying a CI is – it covers you regardless of whether your beneficiaries would be able to claim it within the tenure or not. This is neither the case with life insurance nor health insurance. They both only provide risk coverage in case the borrower dies during the tenure – but not if he/she survives. However, critical illness is uniquely designed for the survival of the borrower. Also, it has tax benefits under Section 80D along with cost-free health checkups. The deducted amount to be claimed is up to Rs. 25,000 and Rs. 30,000 for persons aged below 60 years, and senior citizens, respectively.
Significant features of both insurance policies
- You get the benefits of its coverage for as many times as you want – provided you show proof of the reason for hospitalization.
- If you are diagnosed with an illness that needs multiple checkups and hospitalizations, you avail the facility, but not more than the insured amount.
- Need to buy it at least 24 hours before you get hospitalized.
- You can use the money for both before and after hospitalization.
- It covers all diseases, ailments and accidents – except the ones included in critical illnesses.
- It doesn’t have any recurring benefits.
- If you are diagnosed with a critical illness, you get the entire amount at once. So, you can’t use it more than once.
- This is only for expensive treatments. The benefits will start again once it is renewed after a year.
- This doesn’t require you to be hospitalized either in the past or currently.
- Even if you are not admitted at that time, you can get CI.
- Only pre-requisite is that you should have been diagnosed with a critical illness.
- Unlike health insurance is covers the expenses of hospitalization, treatment and family’s financial issues.
Should You go For an Add-on for Your CI?
Critical Illness policy can either be bought as a standalone policy or with some riders along with it. Riders or add-ons are generally offered with collaborating or bundling them with other insurance schemes. Both the types though have similar terms and conditions. However, a standalone policy provides typically more benefits than its counterpart. There is flexibility in choosing the durations in independent policy. Also, the amount of risk coverage is higher than the ones offered with a rider insurance. Hence, if you apply for a CI policy with riders, when you already have bought a health insurance plan – the insurance provider would not offer it for more than 5 Lakh.
Additionally, as a standalone policy offers you a higher amount of sum insured, it would be comparatively more expensive than the one with add-ons. Such type of schemes also have certain advantages. It is not compulsory that you renew your old life or health insurance plan – if you have bought a standalone CI policy. Also, both life and general insurance companies provide these plans. The amount given with the rider is restricted to 50%, whereas, the premium is limited to 30% of the central scheme.
A significant difference between the two is that life insurance policies generally have longer tenures than the latter. There are some special CI plans for women as well. Some companies offer these plans for women-specific diseases like breast and cervical cancers. Moreover, if due to these illnesses, there is some deformity in the child from birth – the companies also provide for his/her studies. CI policies can be bought by a single person for himself/herself, can for his family too. Critical illness insurance for family is called “Family Floater.”
Points to Keep in Mind
It is an excellent decision to buy both – health insurance and critical illness policies for maximum benefits. Since one covers only hospitalization expenses and the other covers treatment with it too. You can utilize a health insurance plan for paying hospitalization expenses also if you buy both the schemes. CI plan doesn’t reimburse the hospital bills so that medical insurance would be highly beneficial. The critical illness list differs for every insurance company. Some insurance companies offer 6-12 covered in the list, while some would provide all of them. While deciding to purchase one, ensure that you consult your doctor for better guidance.
There are some diseases which might lead to some other conditions in the future too. So, consulting a doctor would help you decide as to which diseases you might want to buy the policy. Consider going through all the other benefits like surgery expenses and extra features. To get more facilities, also check which hospital are in the network of the insurance provider. Make sure you also check what the exclusions in the illnesses covered are. One of the significant things is to check the ratio of settling the claim of the borrowers, by insurance companies.
There is no specific amount of risk coverage decided on buying a CI. However, an ideal amount to buy should not be less than Rs. 10 Lakh. Alternatively, an amount which is almost 4-5 times higher than your yearly salary is a good starting point. You will get higher benefits if you buy a higher risk coverage – because of its other long-term effects. Ensure that the plan covers everything mentioned. Sometimes you wouldn’t know some clauses and medical terms. Make sure the money is not manipulated by dividing it into all these related terms.
Clauses and Terminologies To Know
It is a good practice to choose only those CI schemes which are renewable even in the future. Sometimes, due to history and related diseases – you might get diagnosed with an illness included in the list. As you grow older, you might need extra strong financial health. For this, make sure to read the exclusions in the list thoroughly. After a waiting period of almost three years, some diseases which are pre-existing might get included. If you want risk coverage for those diseases sooner than that, you would have to purchase a policy at a higher premium rate.
Sub-Limits: There are some limits on risk coverage of some diseases. Let’s say, the amount covered for lung cancer is capped at 7 Lakh, the company would pay only that amount if you are diagnosed with it in between the policy. After that, it will continue with the left out amount in the scheme.
Survival Clause: This is a critical clause you should look for. If you are diagnosed with paralysis, you should have survived for a specific period as written in the policy. Only after that, you would be eligible to claim it. This means, if there is a survival clause of 2 months for an illness with which you have diagnosed. You must have survived for 60 days for that. Also, if the policyholder dies under that period – the policy would become null. This means, there would be no benefits for the beneficiaries.