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Critical Illness Insurance Policy In India And How To Choose One?

​A conventional Critical illness cover or Dreaded disease cover is an insurance product, where the insurance company gives pre-decided lump sum cash payment to the insured if he is diagnosed with a critical illness or undergoes any of the surgeries covered in his critical illness insurance policy.

A typical critical illness insurance policy may cover Cancer, Major Organ Transplant, Cardiac Arrest, Multiple Sclerosis , Third Degree Burns, Aorta Graft Surgery, Heart Valve Replacement or repair, Coma, Quadriplegia, Total Blindness, End Stage Renal Disease, etc. Pre-existing conditions are not covered under critical illness insurance.
The policy may require the policyholder to survive a minimum number of days (the survival period) from when the illness was first diagnosed. The survival period used varies from company to company (Usually being around 30 days after diagnosis).
Both, life insurance and general insurance companies offer critical illness insurance cover. In India, the premium paid for the same is eligible for income-tax benefits under Section 80D.

Why should one consider buying a Critical illness cover?

 Critical illness insurance cover is no less than modern day super hero​. Here’s why…
God forbid, if you are diagnosed with early stage cancer, it would have three major implications:
One: Your treatment costs are likely to hit the ceiling and your health policy (assuming you have one) may not be enough to cover them. Also, many health policies specifically do not offer coverage towards critical illnesses. In some cases one single set of treatment procedure might wipe out a lifetime of savings.
Two: The time required to recover may be far more than your allotted paid leaves, meaning loss of regular income. So, at a time when your outflows increase manifold, your income virtually comes to a stop. This might make it difficult to pay monthly expenses such as your house loan or your child’s education fee or in worst cases even everyday amenities. Even worse would be if you were laid-off from work due to the illness, your income is unlikely to start anytime soon.
A self-employed person might completely lose his business in this phase unless he is insured under a critical illness cover.
Three: Even after you have been treated and cured (which is very likely today thanks to advancements in modern medicine), you might not be able to put in the same working hours or energy into work, affecting your future earnings as well.
So, you first survive the grueling treatment, then the long recovery period, and finally when you try to get back to your life, the financial mess that’s left behind makes you wish you hadn’t survived at all.
This is where your Critical Illness cover plays the super hero.
You see, diagnosis of a critical illness is a life-altering event. It comes with an emotional upheaval strong enough to dishevel lives of not only the victim but also his or her entire family.
A critical illness cover helps ensure that in such a situation you need to worry about only what should be worried about, that is the illness and its treatment. It gives you the prospect of surviving the illness and having a chance to resume a normal life sans the burden of financial wreckage.
Since the Critical Illness insurance cover pays you a lump sum on diagnosis, it provides for more than just hospital expenses that a normal health plan might not cover. The amount can be used not only towards treatment, but also to pay travel and accommodation expenses. For instance, if you need to go to a different city or maybe even a different country for treatment or to make up for the temporary loss of income, in terms of monthly expenses till you are well enough to fully resume your job, your critical illness cover would come handy.

One may argue that he is too young for a CI cover, or already has a health policy and a life policy. On contrary, it is never too early to buy a critical illness cover. Specially today the health reports suggest that many young professionals and population are falling prey to critical illnesses like heart disease, cancer, etc. 
Though the younger ones often reason out that they have enough time to buy a critical illness insurance plan, they should reconsider their decision. Recent studies show that there is a steep rise in the occurrence of critical illnesses between the ages of 26-35 years.
Another reason most people give of not buying critical illness policy is that they already have health and life insurance plans. However, they fail to realize that the purpose of each of these policies is altogether different.
• If your health policy covers critical illness, it will pay only for hospitalization. A health policy is a ‘reimbursement policy’, which means it will only reimburse treatment costs in India (subject to submission of required proof) and nothing else. On the other hand, a critical illness policy is a ‘benefit based policy’, meaning it will provide you the benefit only on the basis of diagnosis without questioning your expenditures. It can be used to take care of your monthly expenses, your loss of income, or travel and accommodation expenses abroad. The two should ideally be used to complement each other- the health insurance policy paying for as much of the treatment costs as possible, and the critical illness policy paying for everything else.
• A life insurance is generally meant to provide your family compensation on your death. A critical illness policy ‘pays you to live’.

In short, a critical illness policy gives you the freedom to choose where, when, and how to spend the amount you receive. It is an unconditional monetary support in time of need.

What should I consider while choosing a plan?

Remember to always compare three to four policies before you choose your plan.

Five factors to consider before buying critical illness cover: 

  • Diseases Covered: Understand how many critical illnesses are covered under the plan and their descriptions/definitions
  • Exclusions: Understand what will not be covered
  • Claim Process: Check the survival period required against each illness and the related claim processing time
  • Renewal Benefits: Check the discounts offered on claim-free renewals
  • Coverage: Check the various sum insured options available

How much cover should be enough?

Three components play a major role in deciding the right sum insured for you: 

  • Current Income: Sum insured should be at least around twice the current annual income
  • Age: The younger you are, the more is at stake and the more important it is to have a higher sum insured.
  • Personal Liabilities:This includes the expenses that are foreseen over at least the next five years taking into account the number of dependent family members and their financial needs, any mortgages or loans, etc.
While there are many factors to consider while buying a critical illness cover, there is very little scope for any trade-off in the cost department. Buy the policy that is most suitable to you, even if it means bearing a little extra cost!

Article by Mitali Zaveri

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