Understanding critical illness insurance: what does it cover?

The list of critical illnesses that the chosen plan will cover remains mentioned in the policy documents. This is usually an over-the-counter plan with no pre-medical check-up but with a declaration of good health. It is a comprehensive plan that can be easily acquired and is available in individual and family floater plans. 

Who should buy a Critical Illness Plan? 

Critical illness insurance is beneficial for: 

1. Individuals with hereditary ailments: The risk factor increases significantly for other family members if there is any hereditary influence regarding any particular ailment. So, it is essential to remain prepared beforehand.  
2. Breadwinners: If a family has a single breadwinner, he/she must be extra careful regarding these aspects to ensure smooth financial security. 
3. High-risk occupation individuals: People involved in high-risk occupations involving high pressure are more prone to severe ailments. They must take the necessary precautions beforehand to avoid jeopardising their family’s financial security at the last moment. 
4. Individuals beyond a particular age bracket: Once you cross the threshold of 40 years, your health risks increase manifolds. It is better to stay protected in advance to enjoy a secure future. 

Features of a Fixed Benefit Critical Illness Plan: 

Critical illness insurance varies slightly from standard health insurance plans.  

1. Fixed benefit:  

This type of plan offers a fixed lump sum benefit to the insured individual on the diagnosis of any of the listed critical ailments or undergoing any specific treatment. Once this payment is complete, the coverage for that ailment automatically ceases. You can utilise the payout to continue with the treatment processes.  

Thus, the insurer pays the entire lump sum insured upon diagnosis of a covered critical illness, regardless of the actual medical expenses incurred. 

2. Specific Illness Coverage:  

The plan covers a predefined list of critical illnesses mentioned in the policy document, wherein the sum insured is paid on diagnosis alone, irrespective of the mode of treatment. 

3. No Hospital Bills Required:  

The payout is not linked to medical bills or hospital expenses. You can use the amount as needed, such as for treatment, recovery, physiotherapy, loss of pay or even household expenses. 

4. Affordable premium:  

Standalone critical illness plans are pretty reasonable and do not burden your pocket. You can use the premium calculator to assess the probable premium payable amount based on your circumstances and proceed accordingly. 

5. Waiting Period:  

Most plans have a waiting period from the policy inception date, during which claims cannot be made. 

6. Survival Period:  

Some policies require the insured to survive for about 30 days after diagnosis to claim the benefit. Thus, standalone critical illness plans are referred to as Survival Benefit Plans. 

Thus, standalone critical illness plans can be taken along with indemnity health insurance plans. The indemnity plan can pay for the hospitalisation expenses, while the lump sum payout can be utilised for any other expenses. 

What does a Critical Illness Plan cover? 

When compared to standard health insurance plans, critical illness policies offer certain typical benefits: 

1. Emergency Financial Support:  

When you opt for a high sum insured amount under critical illness insurance, you ensure comprehensive coverage for yourself and your family. This is especially helpful for treating critical ailments, which often involve complex and expensive medical procedures. If you’re diagnosed with any critical illnesses your insurer lists, you’ll receive a lump sum payout to cover treatment expenses. The payout frequency depends on the terms of your chosen plan, giving you timely financial support when you need it most. 

2. Wide Range of Ailments Covered:  

Critical illness insurance covers a variety of severe health conditions, such as cardiovascular diseases, cancer, kidney failure, coma, and more. However, the list of covered illnesses varies by plan and insurer. Review the policy details carefully to ensure it meets your needs and avoids unexpected financial strain. 

3. Add-On Protection:  

You can also add critical illness coverage as a rider to your existing health insurance policy. This enhances your basic health plan, giving you extra financial security. Even if you already have a standard health policy, a critical illness rider ensures you’re better prepared to handle the financial impact of severe illnesses. 

4. Income Replacement:  

If you’re diagnosed with a critical illness, it might prevent you from working, potentially disrupting your family’s financial stability. With critical illness insurance, the lump sum payout can help cover treatment costs and replace lost income, ensuring your family’s financial needs are met during challenging times. 

5. Affordable Premiums:  

Critical illness insurance plans are available at reasonable premium rates, making them accessible to many individuals. If you have pre-existing diseases (PEDs) or are at risk of critical illnesses, securing a CI policy ensures peace of mind and financial stability. Combining health insurance with critical illness coverage further enhances your protection. 

6. Tax Benefits:  

The premiums you pay for critical illness insurance are eligible for tax deductions under Section 80D of the Income Tax Act. You can claim up to Rs 25,000; if you’re a senior citizen, the limit increases to Rs. 50,000 under the Old Tax Regime. This makes it a financially smart choice for you and your family. 

In summary, critical illness insurance provides essential financial support, covers various ailments, and offers affordable protection with added tax benefits. It’s a valuable addition to your financial planning in India, ensuring you’re prepared for life’s uncertainties.