What is Critical Illness Health Insurance and who needs it?

What is Critical Illness Health Insurance?

Critical Illness Health Insurance is an insurance against the diagnosis of specific kinds of illnesses. It pays out a lump sum amount upon diagnosis and confirmation of one of these conditions or upon undergoing specific medical procedures.

Who needs Critical Illness Health Insurance?

Practically everyone who may be at risk of contracting one or more of the illnesses covered should have a Critical Illness cover. It helps provide for immediate financial needs, especially when there is loss of income due to diagnosis of a specified serious critical illness.

If you are the only earning member of your family, you must purchase Critical Illness Health Insurance.

As the premium is tax deductible and the sum assured on a claim is tax free, it is a no-brainer to purchase a critical illness cover, especially for peace of mind.

Salient features of Critical Illness Health Insurance

• High coverage for a lesser premium

As compared to a comprehensive health insurance plan, a critical illness cover is typically available for a fraction of the cost as it covers a narrower list of specific diseases.

• It covers a number of critical illnesses.

The more illnesses and procedures covered, the better is the insurance coverage, although the premium will be slightly higher.

• It is different from a regular mediclaim health insurance policy.

Mediclaim usually only covers hospitalisation and related expenses, but a critical illness cover includes loss of income from not being able to work.

• There is a lump sum payment.

Unlike mediclaim health insurance, where the payments are based on actually incurred medical costs, a critical illness plan provides a lump sum payment upon settlement of the claim. This may be staggered over some time depending on the terms of the policy agreement for a further reduction in premium.

• Claims are processed based on diagnostic reports.

As the payout amount is significant, there is an assessment by an independent medical practitioner. The insurance company reserves the right to get a second opinion to verify whether all the conditions in the policy are met before settling the claim.

• There is a waiting period before making a claim.

The lower the waiting period, the better the coverage.

• There is a survival period.

The insured has to survive a certain number of days after diagnosis and before making a claim. The lower this period, the better the coverage.

• Income replacement

A part of the sum assured received as a lump sum can be used to replace the income of the insured person.

• Tax free payout

The amount received as a lump sum after settlement of the policy is tax free.

What does a critical illness plan cover?

A Critical Illness Plan covers different illnesses and medical procedures depending on the insurer and the plan selected.

The exact definition of each of these illnesses and procedures varies across insurers, so it is important to know exactly what is covered by reading and understanding the policy wordings.

For example, if A were to get their first Heart Attack, but it were of a lesser severity than what is mentioned in the policy document, the insurer will not be liable to pay out a lump sum amount.

Moreover, unlike health insurance that covers hospitalisation, critical illness insurance can only be claimed once in the lifetime of the insured person.

Critical Illness plans are meant to provide for non-hospitalisation expenses such as doctors’ visits, medicines, living expenses and lost income in the event of diagnosis and confirmation of specific illnesses or procedures. This requires confirmation by an independent medical practitioner, as per the terms of the policy.

There is usually a waiting period before which you can make a claim under a critical illness plan. This is usually at least 90 days from the date on which your policy becomes active.

There is a survival period clause where the insured person has to live for at least 14 to 30 days after diagnosis before a claim can be made.

Critical Illness Health Insurance is usually an add-on plan or rider to an existing life or health insurance plan. It can also be purchased separately as a standalone plan, independent of any other insurance.

Conclusion

Even if you already have a health insurance plan, it is important to have a critical illness cover in case you develop certain serious illnesses which can derail your finances. Health insurance plans generally only cover hospitalisation related expenses, while the payout from Critical Illness Plans can also be used to cover loss of income from being unable to work due to an unfavourable diagnosis of a specified Critical Illness.

ManipalCigna Critical Illness Plan covers up to 30 different Critical Illnesses depending on the plan you choose. You have access to online Wellness Programs as well. There are lump sum and staggered payout options available.