Critical Illness Insurance


Critical illness insurance is a policy that covers some specific life threatening diseases. It typically covers illnesses like cancer, heart attack, organ transplant, kidney failure and paralysis. These conditions may seriously affect your lifestyle and your ability to earn income in the future. The cost of treatment of such illness is also very high and can easily drain your lifetime worth of savings.

One should definitely buy critical illness (CI) cover if they have history of critical illness in the family. The chances of contracting such diseases increase as you age. Therefore, you should consider buying such plans as you get older. It is also a good option if you do not have enough savings in case you get seriously ill.

While many regular health insurances cover these illnesses, expenses of such illness generally run up to more than what your insurance may cover. It also covers the entire cost of treatment and not just hospitalization as is in the case of regular health insurance. This amount can be used for treatment and recuperation and also for your daily expenses if the illness affects your ability to earn. Unlike health insurance, critical illness insurance gives out payment of sum insured in lump sum regardless of the actual expense incurred.

Most insurance companies cover 8 to 20 critical illnesses. Critical illness cover can be bought as standalone policy or as rider on your existing insurance. Critical illness plans have waiting period of 30 to 90 days. If you are diagnosed with such illness during this period, it will not be covered under the policy. Most of insurers have set the entry age for
critical illness plan at minimum 5 years and maximum 65 years. One can choose from different amount of cover and term duration.

If choose critical illness as a rider plan you will have two option. In one option your basic insurance policy will continue if you use your
critical illness plan and in second your basic insurance plan will end if use
critical illness plan. The premium of critical illness plan where it is bought as a rider remains constant during the entire term of the policy. However, this also means that there will be no flexibility to choose a higher cover for
critical illness. On the other hand, premium for standalone policy increases as you grow older. It also provides the flexibility in terms of coverage and benefits.

Under critical illness policy you also get certain tax benefits. You can avail tax exemption up to Rs.15,000 under section 80D for the premium paid towards the plan. Senior citizens can get exemption of up to 20,000.

Critical illness plan does have its downside. It does not payout hospitalization expenses. Also, the number of critical illnesses is extensive but the illnesses covered under the plans are limited. There are defined terms and conditions for the diagnosis of the illness. It s important to read about the illness covered in the policy and other terms & conditions and exclusions before deciding on the policy for yourself and your family.

Mushtaq Kazi
Mushtaq is the co-founder of Mushtaq has had corporate stints with Kotak Securities & IIFL group. He holds an MBA degree from Pune University.
His interests include cooking & gardening. When he is not cooking or gardening, he is writing.

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