Critical Illness Insurance

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There are many things in life you simply have minimal control over. Your health is one of them. In today’s world of climate and lifestyle changes, if it feels like “stressed out” is your new normal, you’re not alone.

Even if you choose a health insurance plan best suited to your requirements, you may end up facing a dearth of sufficient coverage should you get diagnosed with a critical illness. Ailments such as cancer, cardiac stroke, and paralysis, to name a few, are not encompassed by a basic health insurance policy.

In this article, we will learn how to maintain financial stability, even after suffering from a critical illness.

Let’s begin by understanding-

What Is Meant By A Critical Illness?

Any serious illness, sickness, disease or condition that affects the general well-being of a person, and needs treatment by a medical practitioner can be termed as a Critical Illness. In contrast to general health conditions, a critical illness often requires emergency treatment, and costs way more than the average cost of healthcare.

Here are some conditions that could be termed as critical illnesses-

  • Heart attack
  • Coma, stroke, paralysis
  • Organ transplants
  • Primary pulmonary/arterial hypertension
  • Cancer


What Happens When You Get Diagnosed With A Critical Illness?

We have heard about hard-working, middle-aged people having to quit well-paying jobs - after suffering a stroke. A critical illness can occur to anyone, and can impact their financial stability, drastically. Not only does it affect your earnings, but you will also see a rise in expenses - consultations, treatments, tests, checkups, lifestyle alterations (like the need for wheelchairs, ramp installations, automatic beds that help with movements, full-time nurses, etc.) - and many of these are not covered by a basic health insurance.

With the increase in breakthrough medical technologies, the cost of getting quality treatment is rising exponentially. In this age of medical inflation, suffering from a critical illness and getting treated for the same can really cause a huge financial distress.

So what is the solution?


Importance Of Critical Illness Insurance

Life is utterly fickle. You never quite know what’s up your alley. And, if it’s something as serious as a critical illness like cancer, stroke, etc. - it can have a significant long-term impact on both your lifestyle and finances.

  • A serious diagnosis can impact your work. You may even be required to quit your job for some time. If you are the primary breadwinner of your family, the lack of income and financial stability will be hard for you and your loved ones to face.

  • Money that you’ve saved up for the future or for any goals that you have (buying a house, your child’s education, retirement, etc.) will be used up in treatments, medications, and making changes to how you live. Not to mention the added physical and mental stress.

  • Additional expenses like physiotherapy, rehabilitation, nursing care, wheelchairs, etc. will also have to be factored in.

So, a critical illness is not just physically and mentally draining but it also causes financial disarray. Both to you and your loved ones.

How do you deal with this? While health insurance can help cover some of the costs associated with hospitalisation and treatment, other expenses must be paid by you.

In such cases, Critical Illness Insurance is a life raft in the stormy sea of medical and lifestyle bills. It pays a lump sum to you if you are diagnosed with a critical illness listed in the policy document. This sum can help cover costs that are not covered by standard health insurance policies like paying school fees, buying medical equipment, etc.


Who Should Buy A Critical Illness Insurance Plan?

You should invest in critical illness insurance if -

  • You Are An Earning Member Of Your Household

    As financial providers for their family, it is important for breadwinners to ensure their family’s financial security no matter what happens. If a critical illness forces you to stop working, the loss of income will severely hamper your family’s lifestyle and well-being. The lump sum received from critical illness insurance acts as an income replacement and helps you and your loved ones take care of major and minor expenses.

  • You Have A Risky Occupation

    If you have a job that’s stressful or makes you work round-the-clock, this may lead to an increased susceptibility to severe illnesses like stroke, heart attack, etc. A critical illness insurance plan is a good backup to have in such cases.

  • A Critical Illness Runs In Your Family

    Your family’s medical history is usually a basic indicator of how your health will pan out. If a critical illness like cancer is prevalent in your family over multiple generations, you will also be likely to contract it. Critical illness insurance is a must-have in such a case.


Critical Illness Insurance Plan Vs Health Insurance Plan

Let us now understand the differences between the two plans in a comparative table below –

  Critical Illness Insurance Health Insurance
Policy Coverage Critical illnesses that are listed by the insurance company like cancer, stroke, etc. Covers hospitalisation/treatment costs related to an injury, disease, or accident.
Purpose You receive the payout if you are diagnosed with a listed critical illness, and you have the freedom to use the claim amount in any way you want. Covers eligible hospitalisation costs such as room rent, consultation fees, treatment/surgery expenses, etc. - depending on the policy’s terms and conditions.
Waiting Period Typically, 90-180 days from the date of policy issuance. This can vary across insurers.

Types of waiting periods -

Initial waiting period during which nothing is covered except accidents. This lasts 30 days.

PED waiting period, where any pre-existing disease diagnosed or treated within 4 years before policy purchase is not covered. This lasts 2-4 years.

Specific disease/treatment waiting period, where certain illnesses and treatments aren’t covered for 2-4 years.

Survival Period You must survive a specified duration after the date of diagnosis, which can vary from 15 to 30 days according to the policy terms. Only then will you receive the claim amount. No survival period is applicable.
Policy Duration The policy remains valid until a claim is filed or until the policy's expiration date. The policy remains valid until either the full cover amount is used or until the policy's expiration date.


Important Conditions In Critical Illness Insurance

Keep an eye out for these crucial conditions when buying critical illness insurance -

  • The Coverage Offered

    The specific illnesses covered by a Critical illness Insurance policy can vary from one insurer to another. So, it is important to review the list of covered illnesses and policy terms carefully before making a decision. For instance, if heart disease runs in your family, opt for a policy that covers the same.

  • Duration of Coverage

    Critical Illness Insurance policies typically provide coverage for a limited period of time, rather than offering lifelong protection. This means that once you reach the designated age or the coverage period expires, the policy will no longer provide financial protection in the event of a critical illness.

    It is important to note that in addition to the coverage period, a critical illness insurance policy will also cease as soon as a claim for any one of the covered illnesses is made. This means that if you are diagnosed with a critical illness and make a successful claim, the policy will no longer provide coverage for any other illnesses, even if the policy coverage period has not expired.

  • Survival Period

    Your family’s medical history is usually a basic indicator of how your health will pan out. If a critical illness like cancer is prevalent in your family over multiple generations, you will also be likely to contract it. Critical illness insurance is a must-have in such a case.

  • Waiting Period

    Critical Illness Insurance plans have waiting periods, which is a specified amount of time that must pass before you are eligible to make a claim. The waiting period can vary between insurers, ranging anywhere from 90 to 180 days (or more). The purpose of the waiting period is to prevent people with illnesses from purchasing a policy and immediately making a claim. Insurance is meant to provide coverage for unforeseen risks and not for known or guaranteed risks.

    It is important that you carefully review the policy documents to understand the waiting period that applies to your policy.

  • Exclusions

    Understanding what the insurance plan doesn't cover is crucial when purchasing any insurance coverage. The "exclusions list" includes such circumstances. For a complete list of these exclusions in your policy, you must refer to the policy document.


What Does A Critical Illness Policy Cover?

It can help you cover expenses like doctor consultation fees, the cost of medicines and tests, among others. You can use the money from a critical illness policy to cover ambulance costs and room rent, along with pre and post-hospitalisation expenses. If your monthly income has been compromised due to any of the listed illnesses, the payout can also be used by your family as a substitute.


List Of Illnesses Covered In Critical Illness Insurance Policy

Here are some major conditions that are covered across most plans-

  • Cancer (of specified severity based on the policy)
  • First heart attack (of specific severity based on the policy)
  • Stroke resulting in permanent symptoms
  • Open chest Coronary Artery Bypass Grafting (CABG)
  • Open heart replacement or repair of heart valves
  • Kidney failure requiring regular dialysis
  • Major organ transplant, like liver and heart valves
  • Bone marrow transplant
  • Permanent paralysis of limbs
  • Multiple Sclerosis with persisting symptoms

Let’s take an example to understand this policy better.

Suppose, Mohan is diagnosed with cancer. He has to undergo radiation therapy, bone marrow transplant, and medications. The cost of these treatments amount to Rs. 7.5 lakhs. Mohan had already bought a Critical Illness Cover for himself, with a sum assured of Rs. 7 lakhs. Hence, most of the expenses for his cancer treatment will be covered by the critical illness health insurance cover.

He just has to pay Rs. 50,000 from his pocket. If he had bought a policy with a higher sum assured, then the entire cost of healthcare would have been covered under the critical illness policy.


What Are The Illnesses Not Covered Under Critical Illness Policy?

Understanding the exclusions is as important as (if not more than) learning the list of diseases and treatments covered. Here are some examples of exclusions-

  • Illnesses as a result of self-injury or attempts of suicide.
  • Conditions caused by ionising radiation or contamination by radioactivity from nuclear fuel.
  • Congenital external diseases, defects, or anomalies.
  • Medical conditions developed as a result of substance abuse, use of illegal drugs, narcotics (unless prescribed by a medical practitioner), intoxicants, alcohol, hallucinogens, etc.
  • Alcohol/narcotics/substance abuse.
  • Any suicide attempts or self-inflicted injuries, regardless of the person’s mental condition.
  • Sexually transmitted diseases like AIDS, etc.
  • Adventure sports like kayaking, river rafting, parachuting, skydiving, etc.
  • Any sort of flying activity, except if the person is paying passenger in a commercial flight.
  • A criminal act with a criminal intent.
  • Any congenital external diseases, defects, or anomalies.
  • Pregnancy or childbirth related treatments.
  • Operations related to the navy, airforce, or military.
  • War, invasion, or terrorism.
  • Nuclear fuel combustion, nuclear, chemical or biological attack.
  • Any illnesses other than those listed in the policy

Note: This is an indicative and generalised list of exclusions and there may be more, depending on the insurer and the policy. Please go through the policy wording to know about its exclusions in detail.

To get the detailed list of the exclusions particularly applicable to your policy, refer to your critical illness policy document.

For instance, you buy a critical illness policy and get diagnosed with hepatitis due to alcoholism. However, it is mentioned in your policy that if your illness is a result of alcohol abuse, the cover will not be valid. Hence, the costs incurred while treating hepatitis will not get paid for.

Medical bills are a common cause of bankruptcy in our country. Critical illness insurance can take away some of the financial stress, when you cannot work anymore due to a serious medical condition. It also provides flexibility, as the payout money can be used to cover a wide variety of potential needs. Take out some time to research, and choose the critical illness insurance plan that offers optimal protection, without putting a huge dent in your pocket.


Factors To Check When Opting For A Critical Illness Insurance Policy

When selecting the appropriate Critical Illness Insurance plan, it is important to consider various factors –

  • Coverage Offered

    Since critical illness insurance is basically a type of financial cushion, you need to purchase adequate coverage. Evaluate your current finances including both your income and savings. Factor in your healthcare fund, if you have one. This will tell you the amount of coverage you need. For instance, if you have ample savings, you can choose a lower cover amount.

  • Payable Premiums

    The premiums and coverage go hand-in-hand. The more the coverage, the higher the premiums. Make sure the premiums fit your budget and coverage is sufficient to provide financial stability. Jot down your healthcare needs and keep an eye on healthcare inflation. You can always use online premium calculators to know the premiums you will need to pay under the plan. This will help you compare the premium rates of different insurance policies before making a final decision.

    If you have enough savings to handle unexpected medical issues, opting for a plan with less coverage can be a viable option. But, keep in mind that healthcare costs are on the rise. Therefore, relying solely on savings could result in irreversible financial loss.

  • Inclusions And Limitations

    To ensure that your plan aligns with your needs, you have to understand the benefits as well as the limitations that come with each policy. Look at what is covered and not covered. Review the policy's terms and conditions thoroughly to prevent any potential claims from being rejected in the future. For instance, if your family has a history of stroke, ensure that it is covered under the policy before you buy it.

  • Claim Process

    It is necessary to understand the claim process and the necessary documentation well - to help you prepare in advance for filing a claim. By doing this, you can always be ready with the required paperwork beforehand and exactly know what steps will entail during the process, ensuring a smooth and hassle-free experience.

  • Claim Settlement Ratio

    Review and check the claim settlement ratio of your insurance provider. This ratio reflects the insurer’s ability and promptness in settling claims efficiently. The higher the CSR, the higher the probability of your claim being settled.

Frequently Asked Questions

1. Why should you buy Critical Illness Insurance despite having health insurance?

A critical illness often comes with prolonged and expensive care that includes check-ups, hospitalisation, medications, home treatments, etc. Not to mention the fact that you may also be required to quit your job and/or make changes to your life (wheelchairs, walking ramps, dietary changes, etc.) that can cost you a bit. While health insurance will cover the eligible medical costs, it won’t take care of ancillary expenses. Critical Illness Insurance will. It gives you a lump sum on the diagnosis of a listed illness that you can use as you wish.

2. What is the survival period in a Critical Illness Insurance policy?

The survival period is basically a time span during which the insured person has to ‘survive’ after the first diagnosis of the critical illness. Only then will they be able to avail of the benefits under the policy. The survival period can be different for different insurers.