Critical Illness Health Insurance

A critical illness plan works differently from a Mediclaim plan. A CI plan is a health insurance plan that pays a lump sum amount, equal to the sum insured, to the insured on acquiring a serious aliment such as cancer or a stroke.

Key Features

Critical illness health insurance plans are meant for the specific purpose of providing a safety net against serious illnesses such as heart attack, paralysis, cancer, organ transplant, bypass surgery, kidney failure, coma, stroke etc. Typically, critical illness cover ranges between Rs.1 lakhs to Rs.10 lakhs, with higher coverage available on satisfying criteria set by individual insurers. Key features of health insurance for critical illness are:

• Usually a 30 day grace period will be applicable after diagnosis (depending on insurer), with compensation being paid out on survival during this period.

• Sum assured will be paid out as lumpsum post-hospitalization.

• Pre-medical check-ups required for people over a certain age limit (generally 45 years).

• Day care procedures can also be covered, wherein treatment such as dialysis that can be done within a few hours will be covered.

• Pre-existing diseases are not covered under this health insurance plan, though most insurers allow cover for pre-existing diseases on completion of a certain period of uninterrupted premium payment (usually 4 years or more).

• Most insurers will have a list of cashless network hospitals where treatment can be availed without payment of cash (settled by the insurer itself).

Advantages of Critical Illness Riders

Critical illness health insurance policies are your best bet against life-threatening diseases or ailments. With the extensive cover provided under this plan, even treatments lasting for months can be potentially compensated in full if the sum assured is sufficient. Key advantages are:

• Tax benefits under Section 80(D) of the Income Tax Act.

• Lumpsum amount to be paid at the end of waiting period, which may be used any way the insured wants to.

• Easy documentation for making claims.

• Wide range of options for sum assured, premium, and policy tenure.

• Additional riders can be bought as per company policy.

• Hassle-free claim settlements once all documents are received by the insurer.

• Pre-hospitalization expenses covered up to 30 days before getting admitted in a hospitalization.

How CI plan works

A critical illness plan works differently from a Mediclaim plan. A CI plan is a health insurance plan that pays a lump sum amount, equal to the sum insured, to the insured on acquiring a serious aliment such as cancer or a stroke. A CI cover provides a lump sum benefit which can pay for the cost of care and treatment, recuperation expense and even pay off any debt if taken. Regardless of your hospital expenses, the insurer pays the full sum insured.

CI plans are therefore defined-benefit plans as the payout is defined and fixed. It does not matter if one holds more than one CI cover as every such policy pays. A Mediclaim on the other hand is an indemnity plan which reimburses the expenses incurred.

What is covered

The number of critical illnesses covered by insurers may vary. Most insurers cover 8 to 20 major critical illnesses or even more. Some of these are cancer, coronary artery bypass surgery, heart attack, stroke, kidney failure, aorta surgery, heart valve replacement, major organ transplant and paralysis. The coverage amount can be anywhere from Rs1 lakh upwards.

How much

Cost of critical ailments would typically be in lakhs and one may have to resort to either borrowing from relatives or breaking existing investments. Moreover contracting a chronic disease negatively impacts an individual's earning potential as well.

The waiting period

One distinguishing feature of these plans is that the insured person needs to survive for 30 successive days (few have zero or 28 days) after the diagnosis of the critical illness in order to make the claim. Further, there is a 90 days waiting period at the start of the policy. Any critical illness diagnosed within the first 90 days and death within 30 days following the diagnosis of the critical illness will not be generally covered.

Where to buy from

A CI plan may be bought from a non-life insurance (general) company, standalone health insurance company or even from a life insurance company.

In life insurance companies, CI is available as a separate plan or it can be added as a rider to the base plan. When added as a rider to the base plan, there can be two situations - One, the base policy continues after the CI rider is used and second where the base policy ends (premium could be lower than in the first situation) if the CI rider is used anytime during the term.

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