Illness strikes without warning and as one gets older, there are higher chances of falling prey to complex medical conditions. With increasing costs of treatment, a plain insurance policy may not be sufficient for some people.
Apart from the hospital charges, critical illness also comes with recovery period expenses like loss of pay from absence at the workplace. Unless your employer provides you with a solid cover for life-threatening medical conditions, a critical illness insurance policy could be of help. However, before you take one, it is important to understand it and how it differs from a regular health insurance policy.
What is a critical illness insurance policy?
This health insurance policy covers specific medical conditions as listed by the insurer. The biggest difference is that on detection of a serious illness, the policy will pay a lump sum (equal to the sum assured) to the insured, whereas in the case of a regular health insurance one gets reimbursed to the extent of their treatment expense on submission of bills.
The amount to be received in a critical illness policy is defined and one need not be hospitalised. Only proof of diagnosis is required.
On diagnosis, the sum assured is paid by the insurance company and the policy terminates. In case of a regular policy, you gt reimbursed to the extent of your expense and the policy is reinstated if you continue to pay the premium.
Things to remember before you buy one
- Check the extent of coverage the insurance provides like how many types of critical illnesses it covers. For example most policies will not cover early stages of cancer or certain heart surgeries (like angioplasty) or conditions caused by adventure sports.
- These can be bought as a standalone policy or as a critical illness insurance rider on another policy. While there is no upper limit (in terms of sum assured and time period covered) on a standalone policy, the rider is restricted to the extent of cover (sum assured and period) provided by the base policy. For example, if you have a term life insurance along with the critical illness cover, the term policy will end typically when you reach 60 years of age. In such a case, you may no longer require a life insurance cover because you do not have dependents but critical illness could become vital. It is therefore good to get a standalone critical illness cover in such cases.
- There is a "waiting" or "survival" period clause in these policies. It means that the amount assured is not immediately credited to the policyholder but comes on his/her survival typically 15 to 30 days after being diagnosed.
- This waiting period also applies to the diagnosis like any other health insurance. This means that if your diagnosis has been made before 90 days (generally. It could vary based on insurer) of buying the critical illness policy, you will not get any benefits. Additionally, some policies cover pre-existing diseases only 48 months after buying the policy while some others don't cover pre-existing diseases at all.
- Like any other health insurance policy, there is no maturity benefit if the insured survives the term of the policy.
- Unlike regular health insurance policies, the payoff in critical illness is one time, after which the policy terminates.