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How Critical Illness Cover Offers A Unique Benefit

As you may be aware, Critical Illness type of health insurance policy pays 
(a) the entire Sum Assured as lump sum amount,
(b) upon diagnosis of any critical illness specified in the policy,
(c) irrespective of the cost of treatment.

Before you get excited by the fact that you get the full amount, and that too without having to submit any bills... Wait!

This policy works best in combination with a conventional Mediclaim policy.


As in the normal course, the Mediclaim policy covers the cost of medical treatment.

And, then comes the unique benefit of a Critical Illness policy.

As you know, a critical illness often results in the person not being able to attend office for a considerable period of time. This can result in tremendous financial hardships, even if the medical expenses are covered by an insurance policy. Here, you can utilize the claim amount to cover your loss of income and other liabilities such as loan EMIs, school / college fees. (Note: Unlike all other types of health insurance policies, this policy does not require you to spend the claim amount for treatment purposes only).

Critical Illness cover can be bought
- either from Life Insurers as a "rider" with a life insurance policy
- or from General Insurers as a "standalone" policy

(By the way, recently even some life insurers have introduced standalone policies).

As usual, there are certain key operational differences between a rider and a standalone policy.

Accordingly, the salient aspects that must be considered, while buying a Critical Illness cover, are discussed below.

One. A typical life insurance policy has a 10 to 30 years term. So, the critical illness rider with such a policy, is also available for 10 to 30 years. On the other hand, standalone policy has only 1 to 3 years term. However, general insurers offer the option of lifetime renewal. Whereas, critical illness rider ends with the maturity of the original life insurance policy (and that too at a time when you are old and the need for a critical illness cover is maximum).

Two. With age, the premium will increase in both the cases. Contrary to popular misconception, even though the basic "life insurance premium" does not vary for the entire 10 to 30 years of the policy term, the premium on the critical illness rider CAN be increased every 3 to 5 years.

Three. In riders, the critical illness sum assured is restricted to the extent of life insurance cover. Standalone policies have no such restrictions on the amount of cover (except the maximum as per the insurer's specific product).

Reaching to the RIGHT Critical Illness Policy, can be a strenuous task.

Four. Riders normally cover only a limited number of critical illnesses. Standalone policies, on the other hand, provide protection against a much wider number of ailments. The premium, naturally, would commensurately be higher. But then, adequate coverage is far more important than the cost.

Five. Critical Illness policies may not always cover the pre-existing illnesses (even after the specified period of normally 2 to 4 years, as most conventional indemnity-based health insurance policies do). So, you must verify this fact very carefully while evaluating various plans.

Six. You also need to check the "waiting" and "survival" periods specified in the policy. To avoid any frauds, no claim is payable if the critical illness strikes within the first 90 days (or some such period) of buying the policy. This is known as Waiting Period. Further, to be eligible for a claim, you need to survive for 30 days (or some such period) from the date of diagnosis. This is known as Survival Period. Obviously, lesser the Waiting and Survival periods, the better it is.

Seven. It is important to note that you do not 'automatically' become eligible for a claim, just because there is a case of critical illness. Insurers have defined "severity" of each critical illness. Only when the illness is severe enough as defined in the policy, does the claim become payable. If not, the claim could be rejected.

All in all, a "standalone" Critical Illness policy has a significant edge over the "rider".

This, in a nutshell, what a Critical Illness policy is and how we can derive the maximum advantage from it.

Needless to mention, to buy the most appropriate policy and avoid disagreements later, you must spend enough time and efforts in thoroughly evaluating the policies offered by as many insurers as feasible.

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