By Sunil Dhawan
Sticking to a healthy diet and following an exercise regime could keep many such unwanted ailments at bay. But, sometimes due to hereditary reasons and mostly with age, the chance of developing a life threatening life-style disease increases. Unlike minor ailments, the treatment in such cases could be a financial drain on the family as the costs may run into several lakhs.
If you already hold a health insurance plan (Mediclaim or Family Floater), maybe it's time to consider creating a second financial buffer through critical illness health insurance (CI) plan. It is often suggested that one buy a CI plan at around 40, however buying early still helps as health risks are less and so is the premium. Saroj Satapathy, CEO, Ideal Insurance Brokers says, "Considering the change in life style and diseases related to work life and people getting a heart attack as early as at the age of 35, I feel one should buy it early to save on premium and also to rule out facing such one off, life threatening situations."
How CI plan works
A critical illness plan works differently from a Mediclaim plan. A CI plan is a health insurance plan that pays a lump sum amount, equal to the sum insured, to the insured on acquiring a serious aliment such as cancer or a stroke. A CI cover provides a lump sum benefit which can pay for the cost of care and treatment, recuperation expense and even pay off any debt if taken. Regardless of your hospital expenses, the insurer pays the full sum insured.
CI plans are therefore defined-benefit plans as the payout is defined and fixed. It does not matter if one holds more than one CI cover as every such policy pays. A Mediclaim on the other hand is an indemnity plan which reimburses the expenses incurred.
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What is covered
The number of critical illnesses covered by insurers may vary. Most insurers cover 8 to 20 major critical illnesses or even more. Some of these are cancer, coronary artery bypass surgery, heart attack, stroke, kidney failure, aorta surgery, heart valve replacement, major organ transplant and paralysis. The coverage amount can be anywhere from Rs1 lakh upwards.
Cost of critical ailments would typically be in lakhs and one may have to resort to either borrowing from relatives or breaking existing investments. Moreover contracting a chronic disease negatively impacts an individual's earning potential as well. Satapathy informs, "One should look at buying the policy depending on few factors like family history, type of job, medical inflation and age. I personally feel one should look at a cover above Rs 15 lakh considering the fact that the entire amount is given after detection of the disease for treatment and rehabilitation."
The waiting period
One distinguishing feature of these plans is that the insured person needs to survive for 30 successive days (few have zero or 28 days) after the diagnosis of the critical illness in order to make the claim. Further, there is a 90 days waiting period at the start of the policy. Any critical illness diagnosed within the first 90 days and death within 30 days following the diagnosis of the critical illness will not be generally covered.
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Where to buy from
A CI plan may be bought from a non-life insurance (general) company, standalone health insurance company or even from a life insurance company.
In life insurance companies, CI is available as a separate plan or it can be added as a rider to the base plan. When added as a rider to the base plan, there can be two situations - One, the base policy continues after the CI rider is used and second where the base policy ends (premium could be lower than in the first situation) if the CI rider is used anytime during the term.
"As a rider under life insurance policy the premium remains constant through the entire term of the policy, thus the overall cost may remain lower than a standalone policy. Alternatively, in a standalone CI (Critical Illness) policy the premium is likely to change as you grow older," says Satapathy.
In the latter, one may be bereft of life cover after using the CI rider. Finding an insurer to provide life cover to someone with a critical illness may be difficult too. Therefore, make sure you know what you are buying. Also, the rider's sum assured and premium is restricted to 50 and 30 per cent respectively of the sum assured and premium respectively of base plan thus the flexibility to choose a high cover for CI may be lost.
Separate CI plans of life insurance companies are highly complex, restrictive and have several conditions attached to them. Getting a CI plan from a non-life insurance company or a health insurance company may therefore be a better option. "A standalone policy offers more flexibility in choosing the sum insured and larger covers as compared to riders," says Satapathy.
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One can buy CI as an individual plan or even as a family floater (FF). Some non-life insurance (general) insurers and standalone health insurance companies)may allow CI to be added to a base Mediclaim plan. Some may offer women specific CI plans. The term of a CI cover offered by non-life insurers and standalone health insurers is usually smaller than that offered by life insurers. However, buying CI from them helps because in case one discontinues a life insurance policy, even the CI rider gets terminated. Varun Dua, CEO & Co-founder, Coverfox. com feels, "Separate critical illness riders being specialised plans usually have better benefits and cover more diseases than riders. Hence standalone plans are recommended."
Bought from any company, critical illness insurance also gives you tax benefits under Section 80D of the Income Tax Act, up to Rs 25,000 for individuals below age 60 and up to Rs 30,000 for senior citizens for financial year 2016-17. Check if the plan is available online. Even though the online version is not cheaper, it's easier to buy and saves time. Most online CI plans allows buying it without undergoing medical tests.
Being a defined-benefit plan, the CI plan will not reimburse hospitalization cost. Therefore, have a mediclaim policy in place to meet the hospital bills. Also, the terms of the contract could be stringent. Satapathy informs, "The contract will outline definite terms and conditions for the diagnosis of the illness. For instance, the diagnosis needs to be made by a particular physician or the holder needs to undergo a specific test to confirm the illness. It is only after the adherences to these conditions will the claim of the holder be settled."
? What to do
Look for a Mediclaim plan that allows adding critical illness plan to it. Else buy the CI plan separately for self and spouse. But before you zero-in, take a careful look at the policy details. Satapathy says, "It is essential to make sure that one reads through the exclusions mentioned in the policy document and one may like to consult one's family doctor on the policy language/coverage/waiting period to see if it is fair to the buyer." Essentially, critical ailments are of long duration and slow progression thereby severely affecting one's earning potential. Protect yourself before such diseases damage you financially.
Source: Economic Times
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