The way lifestyle keeps changing is significantly impacting human health, which may result in critical illnesses across all age groups. In this situation, a Critical Illness Insurance Policy can save you from unwanted financial burdens that may occur in illness.
What is Critical Illness Insurance?
Critical illness insurance is a type of insurance policy that provides a lump-sum payment if the policyholder is diagnosed with a serious illness, such as cancer or heart disease, helping to cover medical expenses and other costs during their illness.
Premiums for critical illness insurance can vary depending on factors such as the age and health of the insured, the coverage amount, and the specific illnesses covered by the policy. It’s important for individuals considering critical illness insurance to carefully review the terms and conditions of the policy to understand what illnesses are covered, any exclusions or limitations, and the process for filing a claim.
Key Features of a Critical Illness Insurance Plan:-
- Lump-sum Payment:- The insurer provides the lump sum payment for the treatment of covered illness to the policyholder.
- Financial Protection:-The lump-sum payment helps to cover medical expenses, loss of income, and other financial burdens associated with their illness.
- Tax Exemption:- Policyholders can claim a Tax deduction on the Premium paid for a critical illness covered under Section 80D of the Income Tax Act. Those below the age of 60 years can claim up to Rs. 25,000/- and Senior Citizens (above 60 years) can claim up to Rs. 50,000/-. Please Note:- This amount may vary as per the tax regime.
What to Consider While Opting for Critical Illness Insurance?
When considering critical illness Insurance, it’s important to keep some key factors in mind to ensure you choose the right coverage as per your needs:
- Premiums:- Try to compare premium rates from different insurance providers and understand how they may change over time. Also, consider your budget and how premium costs fit into your overall financial plan.
- Non-Medical Expenses:- Critical illness insurance covers non-medical expenses such as transportation costs, child care, and so on, easing the financial burden on the individual and their family.
- Claim Process:- Understand the claims process, including the documentation required to file a claim and the timeline for receiving benefits. Choose an insurer known for efficient claims processing and good customer service.
- Survival Period:- Most policies require the policyholder to survive a specified period after diagnosis (e.g., 30 days, depending on the plan) to be eligible for the payout.
- Policy Terms & Conditions:- Carefully review all terms and conditions of the policy to ensure that you fully understand what is covered in the policy and any limitations or requirements.
How Critical Illness Insurance Works?
Critical illness insurance works as a policy where the policyholder pays their regular premiums to an insurance provider as per the policy terms. When something misfortune happens that the policyholder is individually diagnosed with any kind of critical illness, then the Insurance provider applies a waiting period.
- When the waiting period ends, the policy offers a tax-free lump sum amount. This financial support can be utilized to cover policyholder expenses.
- This may vary based on the terms and conditions of the policy.
- When once a successful claim is processed the policy terminates.
- It offers crucial financial support alongside traditional health insurance.
Critical Illness Insurance Vs. Health Insurance Plan
S.No. | Parameters | Critical Illness Insurance | Health Insurance |
01. | Purpose | Critical Illness Insurance is designed to provide financial support if diagnosed with a specific critical illness listed in the policy. Such as Cancer, Permanent Paralysis. It helps individuals to cover non-medical expenses associated with their illness. | Health insurance aims to provide a wide range of medical expenses and healthcare services such as hospitalization expenses, doctor visits. |
02. | Coverage Scope | Critical Illness Insurance policy covers a limited number of critical illnesses specified in the policy. It provides a lump-sum payment upon diagnosis of a covered illness, which can be used for any purpose. | Health insurance typically covers a wide range of medical expenses, including Routine and emergency healthcare. |
03. | Benefits | Hospitalization is not required to claim policy benefits. Diagnosis is enough to get a lump-sum amount as per the terms of the policy. | Policyholders can avail of cashless facilities at network hospitals of insurance providers. Individuals can also get reimbursement for incurred hospitalization expenses by submitting bills. |
04. | Pay-out | One time Lump-sum amount as per diagnosis of a covered critical illness. | Reimburse actual medical expenses up to policy limits. |
05. | Policy Termination | This policy terminates after the successful claim | Continues to provide coverage for other illnesses and medical expenses even after a claim is made. |
Who Should Buy Critical Illness Insurance?
Critical illness insurance can be beneficial for individuals who want additional financial protection against the costs associated with specific critical illnesses. Here are some scenarios where purchasing critical illness insurance might be advisable:
- People over the age of 40 years:- People over 40 years of age are more vulnerable to developing critical illnesses, and should opt for a critical illness insurance policy.
- Individuals with a history of Critical illness in their family:- Individuals are at a much higher risk of developing a critical illness if they have a family history of the same. They should opt for a Critical Illness Policy.
- Income Protection:- For those who are the primary earner and concerned about how you would manage financially if you were unable to -work due to a critical illness, critical illness insurance can provide a lump-sum payment to help replace lost income.
Pros and Cons of Critical Illness Insurance
Pros:-
- Critical Illness Insurance mainly gives coverage to major critical illnesses. Such as Cancer, Organ Failure, and Heart transplants. As per the Terms and Conditions of the Insurance policy.
- Hospitalization is not required to claim policy benefits.
- Policyholders can claim Tax deduction on the Premium paid for a critical illness covered under Section-80D of the Income Tax Act.
Cons:-
- There is no compensation if a person dies within 30 days of the waiting period.
- If Critical Illness developed due to the usage of Alcohol, Smoking, Tobacco, or Drug intake is not included in the policy.
- Critical Illness Insurance doesn’t provide insurance coverage if Treatment is undergone outside of India.