What You Need to Know About Critical Illness Insurance
A critical illness plan is a type of insurance that provides a lump-sum cash payout if you’re diagnosed with a life-threatening condition listed in the policy. It’s designed to supplement your existing health insurance, giving you a financial safety net to cover expenses that regular health insurance might not.
What is a Critical Illness Plan and How Does It Work?
Critical Illness plan would make a Lumpsum payout on diagnosis of the specified critical illness.( So make sure to read through all Critical illness are covered in your policy).
Unlike standard health insurance, which reimburses your medical bills for hospital stays and treatments, a critical illness plan pays you a predetermined lump sum upon the diagnosis of a covered illness. This payment is made regardless of your actual medical expenses( So you do not have to produce any medical bills to claim). You can use this money however you see fit: to pay for non-medical costs, cover lost income during your recovery, or even pay off debts. ( So the end use is not specified here).Â
Imagine you’re diagnosed with cancer. Your health insurance will take care of your hospital and treatment bills, but what about the time you’ll have to take off work? Or the travel costs for specialized treatment? This is where a critical illness plan comes in, providing a financial cushion that helps you focus on getting better without worrying about day-to-day finances.
The question is how is it helpful ?
Having health insurance and a life cover is a great start, but a critical illness plan offers a unique and crucial layer of financial protection. It’s not a myth, it’s a valuable tool that provides support in three major ways.
Lumpsum Payments
Unlike health insurance, which reimburses specific medical expenses, a critical illness policy provides a lump-sum payment upon diagnosis. You have complete freedom to use this money for any purpose, whether it’s paying for large hospital bills, clearing outstanding debts, or covering EMIs and household bills. This flexibility ensures you can handle various financial needs without added stress.
Income ReplacementÂ
Critical illnesses often lead to prolonged treatments or a debilitated state, making it impossible for the primary earner to work. During these stressful times, a CI plan can serve as an income replacement, providing a financial cushion for your family. This helps compensate for lost income and ensures financial stability when you need to focus on recovery.
Cover both medical and non- medical expendituresÂ
Because the end use of the claim payout is not defined, it can be used for both medical and non-medical expenditures that arise during or after the illness. This includes expenses that standard health insurance won’t cover, such as specialized care, travel for treatment, or even home modifications.
Who should buy it ?
Sole BreadwinnersÂ
If your family’s financial security depends on your income, a critical illness plan is a must-have. It acts as a safety net, protecting your loved ones from financial hardship if you are unable to work.
Individuals with a Family History of CI
If critical illnesses run in your family, you may be more susceptible. It is highly advisable to secure a critical illness cover, as it becomes a necessary part of your health and financial planning.
People with a Sedentary Lifestyle
Those with a sedentary lifestyle face a higher risk of developing critical illnesses. A critical illness plan provides essential protection against the financial fallout of such health issues.
What Illnesses Are Typically Covered?
While the exact list of covered illnesses varies by insurer, most critical illness plans cover a range of serious, life-altering conditions. These often include:
- Cancer of specified severity
- Kidney failure requiring regular dialysis
- Multiple Sclerosis with persisting symptoms
- Benign Brain Tumour
- Motor Neuron Disease with Permanent Symptoms
- End-Stage Lung Failure
- End-Stage Liver Failure
- Primary (Idiopathic) Pulmonary Hypertension
- Parkinson’s Disease Before the Age Of 50 Years
- Alzheimer’s Disease Before the Age Of 50 Years
- Major Organ (Heart/ Lung/ Liver/ Kidney /Pancreas) or Human Bone Marrow Transplant
- Open heart replacement or repair of heart valves
- Open chest CABG
- Surgery Of Aorta
- Stroke resulting in permanent symptoms
- Permanent Paralysis of Limbs
- Myocardial Infarction (First Heart Attack of specified severity)
- Third Degree Burns
- Loss of Speech
- Blindness
- Loss of Limbs
- Deafness
- Coma of Specified Severity
- Major Head Trauma
- Muscular Dystrophy
Note to reader : Always check the policy document to see the full list of covered conditions, as well as the specific definitions and severity criteria required to make a claim.
Basics of the plan?
Let’s understand the basic conditions of the plan , to understand the basic structure of the plans. Again note to readers these a basic conditions can vary from plan to planÂ
Age – 5 years to max 65 Years
Sum Insured – 1 lakh to 1 cr or even more is available under some plans
Renewability : Life Time
Waiting Periods : Applicable ( 0/30/90/180 Days)
Survival Period : applicable ( 0/15/ 30 days) ( This is an important condition, a claim can be made only after the insured person survives this survival period )
Exclusion : applicable ( read policy document for better understanding)
Tax Benefits
Premium Paid : Rs 25,000/- per year ( this is the maximum limit )Â (under section 80 D)
Claim : Tax free claim proceeds
Critical Illness vs. Health Insurance: What’s the Difference?
| Feature | Critical Illness Insurance | Health Insurance |
| Policy Type | Benefit-based | Indemnity-based |
| Purpose | Backup shield for major health crises | Primary shield for medical expenses |
| Payout | One-time lump sum upon diagnosis | Reimbursement of hospital and medical expenses |
| Tied to Bills? | No, the payout is not tied to medical bills | Yes, payout is based on actual medical expenses |
| Usage of Funds | You can use the lump sum as you need (e.g., for lost income, debt, etc.) | Funds are used to pay for medical bills via cashless or reimbursement |
| Claim Frequency | Usually a single claim after which the policy ends | You can make multiple claims throughout the policy period |
| Role | Provides a financial boost for non-medical expenses and lost income | Covers day-to-day and major medical bills |
How can it be boughtÂ
| Feature | Standalone Policy | Critical Illness Rider |
| Type of Policy | Separate, independent policy | Add-on to a primary policy (e.g., health or life insurance) |
| Coverage Scope | More comprehensive, covers a broader list of critical illnesses | Limited to a specific, smaller list of illnesses |
| Sum Insured | Can provide a higher sum insured amount | The sum insured is limited, often tied to the base policy’s sum assured |
| Premium | Higher premium, as it is a separate policy | Lower premium, as it is an add-on to an existing policy |
| Flexibility | Greater flexibility to customize the sum assured and coverage | Less flexible, tied to the terms and limitations of the base policy |
| Claim Payout | The payout is independent and does not affect the base policy | In some cases (accelerated riders), the payout may reduce the death benefit of the life insurance policy |
Busting the MythsÂ
- I have health insurance, so I don’t need a critical illness plan.
This is perhaps the biggest and most dangerous myth. While your standard health insurance policy is essential for covering hospital bills and treatment costs, it’s not designed to handle the full financial impact of a serious illness. A critical illness diagnosis often means a long recovery period,
- I have a health policy. Doesn’t that cover critical illness?”
Yes, you are covered by our health insurance plan for all critical illnesses.Â
- CI policy would cover all diseaseÂ
This is not true. A critical illness plan covers a specific, pre-defined list of severe illnesses and conditions. This list is clearly laid out in your policy document. It is crucial to read the fine print and understand exactly which illnesses are covered, as well as the specific criteria for a claim (e.g., a certain severity or stage of a disease).
- I Get a Claim Immediately on Diagnosis of Critical Illness Insurance
While a critical illness plan is a fixed-benefit policy, it’s not an instant payout. Most plans have both a waiting period and a survival period.
- Waiting Period: A period (e.g., 90 days) from the start of the policy during which no claims can be made.
- Survival Period: A specific duration (e.g., 15 to 30 days) that you must survive after the official diagnosis to be eligible for the payout.
These periods are in place to prevent fraud and ensure the legitimacy of the claim. Always familiarize yourself with these terms before you need to make a claim
The Missing Piece of Your Financial Plan
Now that you’ve debunked the myths and understand the true value of a critical illness plan, ask yourself: Is your current coverage truly enough? A small investment today can provide immense security tomorrow. Start your journey to complete financial protection by looking into a critical illness plan now. Click and book your consultation.
For your easy understanding we have video for you.
