#Personal Finance | 15 MIN READ

Are you financially prepared to deal with any critical illness?

A critical illness is a severe health condition that may be life-threatening and usually involves long-term and expensive treatment. Some examples are extreme conditions related to the heart, cancer, paralysis, major organ transplant, kidney failure, brain tumor, etc. Any critical illness causes immense physical, mental and emotional stress to the individual suffering from it, as well as to the family.

In addition, comes the financial strain of treatment in private hospitals as the public health care system in our country is unable to cater to the burgeoning population. And the financial struggles are not limited to treatment expenses. There may also be a loss of earnings if the breadwinner takes ill. Managing living expenses, doctor visits, hospital and medicine bills, and other related costs can take a massive toll on the family. Given the rising incidence of life-threatening diseases, having a Critical Illness plan is necessary for everyone.

- A Critical Illness (CI) plan is insurance that provides coverage for a list of pre-defined life-threatening diseases. CI plans are not the same as health insurance plans. Health insurance is an 'indemnity' based insurance wherein the insurance company reimburses the actual cost of treatment. Most health insurance plans REIMBURSE, i.e., pay you the money you have spent, and that too only if the insured has been hospitalized for some minimum duration like 24 hours or 48 hours. Critical Illness plans, however, are 'fixed benefit' plans wherein the insurer pays a lump sum if the insured has been diagnosed with any of the acute illnesses covered under the plan. This financial support enables the patient and their family to cope with any loss of income and the increased expenses of providing treatment and care.

One can either opt for a stand-alone plan or a rider with health insurance or a life insurance policy to get a critical illness cover.

- A stand-alone CI policy is like an independent insurance plan. It allows more flexibility and wider coverage, both in terms of the sum assured and the plan duration, compared to a rider. It is advisable to opt for a Critical Illness policy, especially if you believe that you may be prone to suffer from a critical condition due to family history, lifestyle or any personal health concerns.

A rider is an add-on to a base policy to enhance the protection aspect. As per an IRDAI-mandated rule, the sum assured of a rider cannot exceed 30% of the sum assured of the base policy. So, if you are looking for a high cover amount, a stand-alone policy is what you should opt for. Also, in the case of a rider, if the base policy lapses or terminates, the rider benefit too ceases to exist. However, what works in favour of riders is that opting for a rider is much easier as it can simply be added to the base plan by paying an additional premium. Also, riders require the premium to be paid for a limited period which makes them more affordable than a stand-alone policy. It is essential to understand both options in detail and decide what best suits your needs.

Different CI plans and riders come with various benefits, and one should always evaluate and compare options before coming to a decision. Listed below are a few factors that one should consider when looking to buy a critical illness cover:

- Coverage and benefits: The number of acute conditions covered, the level of severity and type differs from plan to plan. For example, some CI plans might cover 36 critical conditions, some cover 20, while others might cover 12. Naturally, the cost also varies accordingly. However, just the plan cost or the number of illnesses should not be the deciding factor. For example, suppose you are prone to certain specific ailments because of family history or any existing medical conditions. In that case, you need to ensure that those ailments and related conditions are covered in the CI plan. For example, if you have asthma, your CI plan should cover lung conditions in its list of covered ailments.

The benefits also differ for different policies and riders. For example, while some ensure accidental death and partial or total disability due to accidents, some don't. Similarly, some CI plans allow for multiple claims for different levels of severity of one particular illness or on being diagnosed with different diseases at varying times during the plan term, while some don't.

- Waiting period: All CI plans have a 'waiting period' that means the benefits under the policy shall be payable only if the insured is first diagnosed as suffering from a defined critical illness after a specified duration from the commencement of the policy. This duration is usually 3-4 months depending upon the insurer. In addition, there might also be a 'survival period' clause which states that the person diagnosed with the ailment must survive for a specified period, often 30 days, for the benefit to be paid.

Renewability: Renewability of your CI cover is of utmost importance because one is more prone to acquire diseases as the age advances. Your insurer must allow you to renew your cover year-on-year without any age restrictions and irrespective of whether you have made any claims. While CI riders can be renewed only for a limited term, stand-alone CI plans may offer lifelong renewability, which gives them an edge over riders.

- Claims: When you reach out to your insurer requesting to make a payment as per the terms of the policy or rider, it is called 'making a claim.' The claim process requires you to submit documents that prove that the insured event has occurred. The Company does its due diligence and reviews the claim for its validity before making a payment. It is always a good idea to check the claim process and claim settlement reputation of a Company before buying insurance to ensure that the insurer is trustworthy. However, it is worth noting that trust is a two-way road.

- Tax Benefits: Tax benefits are applicable on premiums paid for CI plans and CI riders. As tax laws change from time to time, it is advised that you get in touch with your tax advisor for details on tax benefits applicable to you.

We are more than ever before in the current age, subject to harmful pollutants and chemicals through air, water, and food. In addition, there is constant exposure to radiation with the 24x7 use of smartphones, laptops or tablets. Work stress and lifestyle changes are the final shot to a healthy life. No wonder there is an exponential rise in sinister health concerns across the globe. Keeping ourselves financially ready for the future helps take some stress off our minds and focus better on living a healthy, happy and content life.