Critical Illness Insurance Policy: How does it work & benefits

The critical illness cases in India are increasing every year. Apart from causing deterioration of health, these diseases also pose a huge financial burden. Fortunately, Critical Illness Insurance, aka, Critical Illness Policy offers financial support in such cases and acts as a lifesaver against the high treatment costs.

Read on to know more about the benefits and workings of a Critical Illness Insurance Policy.

What is a Critical Illness Insurance Cover?

Critical Illness Insurance Cover offers financial compensation if you are diagnosed with any of the critical ailments mentioned under the policy.

Here, the definition/meaning of critical illness is a policy-covered life-threatening disease that occurs during the policy term. Policy-covered, in this context, refers to the diseases covered under a Critical Illness Policy like Cancer, Multiple Sclerosis, Stroke, etc.

Why is Critical Illness Insurance important?

Apart from the physical distress that a critical illness brings, you will also have to worry about your finances during that time. That is why it is important to preemptively buy Critical Illness Insurance to financially safeguard against such situations. Below are some of the reasons why it is important to buy Critical Illness Insurance.

1. Financial coverage

If you get diagnosed with a policy-covered illness, your insurer will pay you a pre-fixed sum. This amount can be used to manage medical and other expenses while recovering from the illness.

2. Several illnesses covered

Usually, all the common critical illnesses are covered in a Critical Illness policy. So, you don’t need to panic if you, unfortunately, get diagnosed with any of those. You can find out the exact medical conditions that are covered by reading the policy document.

3. Backup for your income

While suffering from a critical illness, you may not be able to work. This could affect your ability to provide for yourself and your dependents. Receiving this bulk amount from your insurer may help you cope with your expenses.

4. Complements your health insurance

Health insurance is the most recommended financial protection against high medical expenses. Having a Critical Illness plan on top of your regular health insurance will give you an extensive coverage. It will also help you manage your non-medical expenses more effectively.

5. Afford quality healthcare

Treatments for critical illnesses are usually expensive. Having a Critical Illness Cover will help you afford the best treatments for the illness that you might suffer from.

6. Inexpensive premiums

Critical Illness Covers are usually affordable. For the huge financial benefit you can avail through a Critical Illness Policy, you only need to pay low premiums. 

7. Tax benefits

Money spent on buying a Critical Illness Cover is eligible for tax benefits as per the prevailing tax regulations. So, you can avail the applicable tax benefits if you buy one.

How does a Critical Illness Policy work?

A Critical Illness Policy provides financial compensation if you are diagnosed with an illness that is covered under the policy. The amount you receive can be used for tests, treatments and other expenses as per your discretion. Example: Ruhul buys a Critical Illness Insurance Policy worth Rs. 10 lakh. So, a few months later when he gets diagnosed with cancer, he submits his diagnosis to his insurer and receives the assured some of Rs. 10 lakh. He uses this amount for tests and other medical costs.

List of diseases covered under a Critical Illness Policy

Below are some of the common diseases usually covered under a Critical Illness Policy.

• Multiple Sclerosis

• Myocardial Infarction (Heart Attack)

• Stroke

• Paralysis

• Major Organ Transplantation

• Cancer

• Kidney Failure

• Major Burnes

• Deafness

• Muscular Dystrophy

Note: Please refer to the policy document of your Critical Illness Insurance to know the exact illnesses covered under the plan.

How to choose the best Critical Illness Insurance Cover?

The following are criteria you should consider to find the best Critical Illness Insurance Cover for you.

1. Sum assured

It is important to opt for a policy that offers adequate coverage for the treatment of common critical illnesses. You can use a Critical Illness Insurance Premium Calculator to find out the premium payable for your desired sum assured.

2. Age

Buying a Critical Illness cover at a young age is more cost-effective as compared to buying it later in life. This will allow you to focus your finances on other expenses and investments. Therefore, buy Critical Illness Insurance as early as possible.

3. Illnesses covered

Although some illnesses may be more common than others, it is impossible to predict which illness you may suffer from in the future. That is why, when selecting a Critical Illness Insurance Policy, make sure to choose a policy that covers the most number of critical illnesses.

4. Exit age

Exit age is the age after which you cannot renew a Critical Illness Policy. The usual exit age is around 50 years, however, some insurers alternatively offer lifetime renewability. So, choose a policy that either has a high exit age or lifetime renewability to get its benefits.

5. Survival period

Survival period refers to the duration that the insured has to survive the illness. Only after this period the insured will be eligible to receive the sum assured. Unfortunately, the insurer may not be able to honor a claim if the insured suffers death during this time. That is why you should choose a policy that has a short survival period.

6. Diseases that run in the family

Sometimes a critical illness has a high chance of occurring in a person with a family history of the illness. So in such cases, the person can buy a policy that covers that specific illness rather than paying for all the diseases. This will significantly reduce the policy premium payable.

7. Inclusions and exclusions

It is important to go through the policy document to find the inclusions and exclusions of the policy. Choose a plan that offers more inclusions and fewer exclusions.

How to buy a Critical Illness Plan online

Follow the below steps to buy a Critical Illness Plan online. Also, note that different insurers may have different processes.

1. Select a plan

As discussed earlier, choose a plan from the insurer’s website or mobile app that has a reasonably high sum assured amount. The higher the sum assured, the higher the premium payable. So choose a plan that fits your budget.

2. Payment

After selecting your preferred plan and rider (if chosen), you will have to fill in your personal details. After that, you can make an online payment for the policy premium.

3. Fill Proposal Form

Next, you need to fill out a Proposal Form. A Proposal Form is a detailed form that requires information about your life, lifestyle and medical history.

4. Medical check-up

Based on your medical history and lifestyle, your insurer will schedule medical tests. Only after these tests are completed your Critical Illness Cover will come into effect.

How to file a claim for a Critical Illness Insurance Policy?

Follow the below steps to raise a Critical Illness Insurance claim. Also, note that the process may differ from insurer to insurer.

Step 1: Once you are diagnosed with a critical illness that is covered under your policy, inform your insurer and register a claim.

Step 2: Submit the necessary documents to file a claim.

Step 3: Based on the terms of the policy and the submitted details, the insurer will either accept or decline your claim.

Documents required for raising a claim

The following are the documents that are usually required for raising a Critical Illness Insurance claim.

• Fully filled claim form

• Photocopy of valid ID proof

• Medical certificate with the diagnosis of the critical illness

• Detailed discharge summary

Note: Your insurer may require more documents depending upon the nature of the claim.

Exclusions of a Critical Illness Insurance Policy

Below are some of the common exclusions of a Critical Illness Insurance policy. Nevertheless, go through the policy document to find out the exact exclusions.

• Illnesses occurring during the waiting period (usually around 90 days)

• Death occurring during the survival period

• Critical illness resulting from smoking, drinking, tobacco or drug use

• Critical illness resulting from a congenital disorder

• Pregnancy or childbirth-related complications

• HIV/AIDS is not covered under this policy

• Illnesses incurred by indulging in war or terrorism

• Cosmetic surgery and dental care

• Reproduction assisting treatments

• Hormone replacement treatment

• Treatments received outside India

Who should purchase a Critical Illness Insurance Policy?

The following are the types of people that are at high risk of suffering from critical illnesses.

1. People working in high-pressure jobs

Studies have shown that people employed in high-pressure workplaces are susceptible to critical illnesses. Thus, such people should consider buying Critical Illness Insurance.

2. People over the age of 40 years

Usually, individuals above the age of 40 years are more prone to critical illnesses. As stated by the Indian Heart Association, half of all heart attacks in Indian males take place before the age of 50. That is why it is recommended to buy a Critical Illness Cover as early as possible.

3. People with families that have a history of critical illnesses

People who have a hereditary critical illness running in their family are highly likely to suffer from the same. So, such people should consider buying a Critical Illness Insurance Policy.

To sum up

Critical Illnesses have become more prevalent in India due to people’s sedentary lifestyle habits. Thus, it is wise to preemptively financially protect yourself against these ailments by buying a Critical Illness Insurance Policy. In that case, if you get diagnosed with a policy-covered critical illness, you will receive the full sum assured. The lump-sum you receive can be used for medical expenses or for any other purposes.

Frequently asked questions

The following are frequently asked questions regarding a Critical Illness Insurance Policy.

What is the difference between a Critical Illness Policy and a health insurance policy?

Regular health insurance only covers treatment costs like hospitalisation, doctor’s fee, medical bills, etc. You can either avail cashless treatment in a network hospital or choose a convenient hospital and get your medical bills reimbursed. A Critical Illness Cover, on the other hand, offers a lump sum of money if you get diagnosed with a policy-covered illness. Also, you need not submit any bills and you can use the amount for medical or other purposes.

What sum assured should I select?

You can select your sum assured by considering your age, health condition and budget. If you are above the age of 40 years or your family has a history of a particular illness, you should consider a higher sum assured. The higher the sum assured, the more the policy premium payable. So, consider a sum assured that fits your budget.

Should I buy a Critical Illness Insurance Policy or a Critical Illness Insurance Rider?

A Critical Illness Insurance Policy is more expensive than a Critical Illness Insurance Rider. Nonetheless, it offers more coverage than a rider. A rider will offer a sum assured only equivalent to the value of the base policy. So, if the base policy is worth Rs. 2 lakh, the sum assured will also be only Rs. 2 lakh. That is why, unless you are on a tight budget, it is recommended to buy a standalone Critical Illness Insurance Policy.

Is there an age criterion for buying Critical Illness Insurance?

Yes, Critical Illness Insurance is usually offered only to individuals between the ages of 5 years to 65 years. However, go through the policy document of the policy to find out the exact age criteria.

What is the difference between waiting period and survival period in Critical Illness Insurance?

Waiting period refers to the 90 day period after buying a Critical Illness Insurance Policy. During this period you cannot raise any claims. Survival period, on the other hand, refers to the period after diagnosis that the insured has to survive before receiving the assured sum. The survival period usually spans between 30 to 90 days. You can refer to the policy document to find out the exact duration of both.

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