So here is the scenario which helps me drive home the point about the importance of critical illness insurance policy in India.
Suppose you are hospitalized with a major heart attack and your spouse is told by the doctor that you need to be operated upon. Big deal you think, you have health insurance or mediclaim to take care of this mishap. But there is a small hitch though.
The operation is going to cost you around Rs 5 lakhs, more than what your mediclaim can provide for and don’t forget the hospitalization bills which includes room rent, medicines and what not.
If only there was someone who could pay that 5 lakhs.
Well, you are in good luck, pardon the heart attack. Health insurance companies are ready to make a one time payout to you but you need to have critical illness plan to avail that.
What is critical illness plan ?
Simply put, this is a health policy where in if you are diagnosed with any critical illnesses, then you are given a lump sum money, irrespective of whether you were hospitalized or not. So in that sense, this does not qualify as a reimbursement policy but is a defined benefit plan.
A critical illness will most probably affect the earning potential of an individual so the benefit paid out by such a policy will help the entire family in dire times.
To take an example, if in the above case, the person has a mediclaim policy of Rs 2 lakh and a critical illness policy of say Rs 6 lakhs, and if the hospitalization charges for the 5 lakh operation was Rs 1.5 lakhs, then the mediclaim will reimburse Rs 1.5 lakhs as should be the case normally and over and above this, another 5 lakh will be given out under the critical illness terms and conditions.
These policies are provided both by general insurance companies and life insurance companies, the latter as riders to a life insurance policy that you take from them.
What is defined as critical illness ?
Most of the insurance companies have their own definition of critical illnesses but there are some 10 -12 that are common.
The common list of critical illnesses are :
- Coronary artery surgery
- Renal failure (failure of both kidneys)
- Multiple sclerosis
- Major organ transplants like kidney, lung, pancreas or bone marrow
- Aorta surgery
- Heart valve replacement
Points to note for such a policy
As is the case with financial products, there are many caveats you need to be aware of when purchasing such a policy.
If you die within 30 days of the illness being diagnosed, you will not get the claim. You will also not get the cover if the illness is diagnosed within 90 days of taking the policy. These differ between insurers so please read the fine print.
The term CRITICAL is up for discussion – so a minor heart attack cannot possibly be a critical case and so the insurance company will not dole out the benefits to you. Once you make a claim, the insurer will have a panel of experts to infer whether the case is critical and payout needs to happen. So do not assume that you will get the money if you have a heart attack or say, cancer – the criticality of the diseases is very important in the purview of critical illness policy.
While general insurers offer a critical illness cover for 1-5 years, life insurers provide it as a rider for a longer term—10-20 years.
Some insurers will limit the amount of money that will get paid out if a critical illness is diagnosed. When this happens, the rest of the sum assured is carried forward to cover other illnesses. So more future claims can be done till the entire sum assured is consumed – after that, naturally the policy terminates. This feature is called coverage continuation option.
Some insurers will allow you to top up the sum insured in the future when your liabilities increase, so check that before you buy.
Please remember that this is not a replacement for a mediclaim policy but a supplement – you might still land up in the hospital with a illness which is not covered under the critical illness and run up a huge bill. So take mediclaim first and then go for a critical illness cover.
How to pick the right cover ?
Before you call the only agent you know and ask for a cover, make sure you –
- understand how many critical illnesses are covered under the plan you are taking
- have compared at least 3-4 policies to arrive at the right one
- go for a policy with the highest age renewal limit
- understand the exclusion i.e. what will not be covered
- go for one with coverage continuation option
- understand whether there is an option to increase the sum insured
How much cover do I really need ?
You can use a rule of thumb here. Approximately, 2 to 3 times of your income is advisable.
So for someone earning say 5 lakhs, the sum insured could be between 10 – 15 lakhs.
Comparison of policies in India
I have done comparison of 3 general insurance companies. Take your pick.
PS : This article is a request by reader Rakesh.