A Detailed Guide to Critical Illness Cover

Life is not just full of surprises but also shocks. You never know when a minor ailment can turn into a lethal disease. If you do not prepare for a medical emergency today, you might not have enough savings when the crisis hits. To secure their well-being, many people turn to standard health policies or plans. However, it is possible that the policy/plan does not extend coverage for life-threatening diseases. Even if the condition is covered, numerous clauses might restrict you from availing the policy/plan benefits. This is where the relevance of critical illness coverage or critical illness optional add-on comes in.

Critical Illness Cover — Meaning

Critical illness coverage or critical illness add-on is a benefit-based health insurance optional cover that can be bought by paying an extra premium. It kicks in soon after you are diagnosed with any life-threatening illnesses listed in the policy document, for example: cancer of specified severity, stroke resulting in permanent symptoms, and permanent paralysis of limbs. However, this  has a waiting period that you need to get through before accessing the coverage benefits.

What distinguishes this coverage from the basic medical insurance or health insurance covers is its flexibility. The pay-out you receive under critical illness coverage can be used for various expenses, not just medical bills.

How Does Critical Illness Insurance Add-on Work?

Let's consider an example to illustrate this:

Suppose there is a person named Raj, who is a 40-year-old software engineer with a wife and two children. Raj leads a healthy lifestyle, but to ensure he is never caught off-guard by a medical emergency, he decides to buy a health insurance with a critical illness cover with a sum insured of ₹50 lakh.

A few years later, Raj is unfortunately diagnosed with a severe heart condition that requires immediate surgery. The hospital staff tells him that the surgery will cost him ₹15 lakh, and after the surgery, he needs to take complete bed rest for three months and cannot go to the office. Raj also has a home loan for which he pays an EMI of ₹30,000.

However, soon after being diagnosed with the cardiac ailment, the insurer credits the entire amount to his account.

Since the pay-out usage is not restricted, Raj first settles his treatment costs. Next, he pays off a portion of his debt. After keeping some cash in his savings account, he invests the balance in a scheme from which he can get regular income post-retirement.

What Diseases Does Critical Illness Insurance Add-on Cover?

The list of diseases covered by critical illness insurance add-on varies among insurers. Here are some common conditions that most insurance policies cover if you buy the critical illness cover:

• Cancer
• Kidney failure
• Open chest CABG
• Blindness
• Stroke
• Primary Parkinson's disease
• Goodpasture's syndrome
• Brain surgery
• Heart attack
• Major burns
• Apallic syndrome
• Repair of a heart valve or open heart replacement
• Benign brain tumour
• Alzheimer's disease

Different Types of Critical Illness Coverage

• Add-on Plan

An add-on is defined as additional coverage to your standard plan or policy. You don't need to undergo any medical screening when you buy critical illness coverage as a rider. However, the downside is that the sum insured under this add-on cover cannot exceed the coverage amount of the base plan in any condition.

• Standalone Plan

As the name suggests, you can get this critical illness coverage even if you do not have a regular health plan. A standalone critical illness plan benefits you by providing flexibility when choosing the sum insured. However, since the policy requires medical screening, any existing conditions can significantly raise the premium.

Key Benefits of Critical Illness Cover

Some significant advantages of a critical illness cover are listed below:

1. Income Replacement 

Since the pay-out offered under this plan comes with flexible usage, it serves as an income replacement for your hospitalisation period and the duration during which you are advised bed rest. You can use the sum to pay for groceries, your child's education, and other household expenses.

2. Tax Benefits

Like a standard health plan or policy, the premium paid towards critical illness coverage is eligible for tax benefits under Section 80D. If you are under the age of 60, you can reduce your taxable income by ₹25,000 under this Section. If you over 60 years of age, the deduction limit increases to ₹50,000.

3. Easy Claim

The claim process for critical illness coverage is simple. As soon as you are diagnosed with a condition, immediately inform your insurer's claim executive. They will request that you provide the medical screening report and doctor's prescription. Once satisfied, the disbursement will be made. 

Conclusion 

Critical illness cover provides financial security if you are diagnosed with a severe illness. It ensures you have funds for medical expenses and can support your family during recovery phase. Standard health plans/policies often don't cover all costs or may have restrictive clauses. With critical illness cover, you receive a lump sum amount to use as needed, reducing financial stress and allowing you to focus primarily on recovery and well-being without worrying about expenses.

Disclaimer: This article is a paid publication and does not have journalistic/editorial involvement of Hindustan Times. Hindustan Times does not endorse/subscribe to the content(s) of the article/advertisement and/or view(s) expressed herein. Hindustan Times shall not in any manner, be responsible and/or liable in any manner whatsoever for all that is stated in the article and/or also with regard to the view(s), opinion(s), announcement(s), declaration(s), affirmation(s) etc., stated/featured in the same. The article does not constitute financial advice.