Why it's important to opt in for a critical illness policy as part of insurance planning?

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Why it's important to opt in for a critical illness policy?
The loss of a loved one due to a terminal ailment can leave a big gaping hole both emotionally and financially. Nothing can repair or replace an emotional loss but a financial loss can be mitigated through a Critical Illness policy. Critical illness in easier terms can be referred to as any disease or illness that can be of terminal in nature. Critical Illness policies are specifically customized policies, which help the policyholder cover the specifically high cost of treatment.

What a Critical Illness policy does is offer an immediate lump-sum amount equivalent to the sum assured of the policy in case the policyholder is diagnosed with a Critical Illness. Not all insurers offer a stand-alone Critical Illness policy, but those who do also specify both the number and the type of diseases they do cover under the policy. The critical illness benefit covers illnesses that are on a pre-determined list of the policy offered by an insurer. The number of diseases covered varies from insurer to insurer, but the most commonly covered illnesses include, cancer, stroke, coronary artery bypass and a major organ failure.

It is necessary for the life assured to understand the benefits and conditions offered by the insurer thoroughly before selecting the benefit. The critical illness benefit will not cover any pre-existing critical illness or congenital conditions. There would be a waiting period for making a claim - a claim can only be made if a critical illness is diagnosed after the waiting period is over.

Most critical illness policies also have a survival clause. This means that the benefit is payable only if the life assured survives a certain period after being diagnosed with the critical illness. If death occurs before the pre-defined period after diagnosis, the benefit will not be payable.

While buying a critical cover, one must look at certain aspects. These include, the illnesses included in the policy and buy one that covers the maximum number of frequently occurring illness that run in your family. You should also thoroughly check the waiting periods listed for each illness in the contract before signing to ensure you are not caught unaware at a future date. Plan features like renewal/ no claim bonus that you can get in form of a percentage increase in sum assured while buying a critical illness plan. A Critical Insurance plan should have an option to increase/top-up the sum insured at later point in life when your liabilities have increased. Also, before buying a critical illness policy one should check if the premiums are fixed or can be increased by the insurance company in later years. Although reviewable premiums tend to be cheaper, it's advisable to get guaranteed premiums because they will save you money in the long run.

A Critical illness policy as many would say can also alternatively act as your medi-claim or a health insurance policy. But this is absolutely incorrect. Critical illness benefit is not an alternative to a health insurance or a 'mediclaim' policy offered by non-life insurance companies. In the case of a mediclaim, the benefit is limited to the expenses incurred on treatment, whereas the lump-sum benefit offered by a critical illness cover does not impose any such restriction. In case of mediclaim, the benefit amount is restricted to the maximum of the incurred expenses or the sum assured, whereas in the case of a critical illness benefit, the complete sum assured is paid irrespective of the expenses incurred. A critical illness benefit complements the mediclaim benefit. While mediclaim takes care of hospitalization expenses, critical illness benefit can be used to cover extra costs that may be incurred while seeking treatment for a dreaded disease.

This article has been authored by Mr. Yashish Dahiya, CEO & Co-founder of www.policybazaar.com

Story first published: Saturday, January 11, 2014, 8:59 [IST]
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