It helps to have a Plan B in place at every stage in life. If Plan A doesn’t work out as you imagined it would, you still have something to fall back on. Similarly, a critical illness insurance plan is Plan B in your overall health insurance coverage. It kicks in when you are diagnosed with a life-threatening disease—something that your standard health insurance plan may not cover adequately.
What is a critical illness insurance plan?
A critical illness cover provides an extra layer of protection to your health insurance plan. It can be a separate policy or an add-on with your existing health insurance policy.
Unlike a regular health insurance plan that covers a wide range of health conditions, a critical illness policy focuses on only a few specific illnesses. Some common ailments covered by critical illness plans are cancer, organ failure, and heart attack. These are typically life-threatening conditions that may be expensive to treat. If you contract any such critical illness, the critical illness plan will pay you a one-time lump sum.
Which ailments does a critical illness plan cover?
The number of diseases covered by a critical illness plan varies from company to company. Some insurers may not cover more than eight illnesses, while some may cover 35 types or more. Some of the most common critical ailments/conditions covered by these plans are cancer, heart attack, stroke, organ transplant, loss of vision or hearing, lung and liver diseases, kidney failure, burns, paralysis, and brain surgery, among others.
Why you need a critical illness plan
You may have bought a very comprehensive health insurance plan. Do you still need a critical illness plan? Yes, you do. That is because this plan works in a different way compared to your health plan.
Your health plan pays for your hospitalisation costs. But what if you were struck with a critical illness that did not call for prolonged hospitalisation and, yet, confined you to bed for months? And what if that illness robbed you of your ability to earn? Who would bear the treatment cost and household expenses? Answer: the lump sum you get from your critical illness policy.
It is true that health plans pay for a wider range of illnesses or surgeries. But the cover may not be enough for critical illnesses, which invite very high treatment costs. A critical illness cover can adequately fill in that gap.
Benefits of critical illness plans
Pocket-friendly: If you think critical illness plans cost a bomb, you are wrong. These are actually cheaper than health plans. If you are, say, 30 years old, you can enjoy a sum insured of Rs 10 lakh for a yearly premium as low as Rs 1,500.
Tax benefit: You enjoy tax deductions under Section 80D of the Income Tax Act on your premiums. If you are a senior citizen, the limit is Rs 50,000. If you are aged below 60, it is Rs 25,000.
Flexibility of use: You can use the lump-sum payout in any way you like. It can go towards your treatment. Or, you can invest the amount and earn an income from it.
Types of critical illness plans
Standalone vs. add-on: Life and health insurance plans often offer critical illness as an add-on benefit. These are cheaper than the standalone plans. But, a standalone policy offers greater flexibility in terms of the sum assured. You can choose the amount. Also, standalone plans usually offer a bigger cover.
Individual plan vs. family plan: Just like health insurance, the individual plan covers one person, while a family plan covers several members of the family.
Special plans: Some insurers offer special critical illness plans for specific groups of people, like women or senior citizens. For instance, a woman-specific plan would cover illnesses like breast, cervical, and ovarian cancer. But, these plans can be a bit costlier than the usual plans.
Things to keep in mind
- Survival clause: The policy may state that you have to survive for a certain number of days after the diagnosis of the disease. It can range from zero to 90 days, depending on the insurer and the disease.
- Waiting period: Critical illness plans do not cover pre-existing diseases. After the policy begins, there is usually a waiting period of 90 days. If you contract any illness within this period, you cannot make a claim.
- Size of the cover: Considering healthcare costs, you should look for a cover of at least Rs 10 lakh.
- Sub-limits: The insurer may not pay beyond a certain sum for a particular disease.
- Diseases covered: Find out which diseases the plan is covering. If you have a family history of a certain health condition, make sure the plan includes that.
- Renewability: Go for plans that offer a lifelong renewal option.
- Exclusions: Make sure you go through the ‘exclusions’ and other conditions that the insurer may impose.
Due to the rise in the incidence of lifestyle diseases as well as in healthcare costs, a health plan may not be enough to cover all your medical expenses. A life-threatening or debilitating illness may eat up all your savings and, at the same time, leave you jobless. So, along with your mediclaim policy, do consider opting for a critical illness cover. One day, you may just thank your lucky stars that you took this decision.