Why a critical insurance policy when you already have a health insurance policy?
A critical illness insurance plan covers major illnesses like cancer, heart attack, coma, stroke, paralysis among others. When you contract a critical illness, the loss is not simply restricted to the expenses you incur. It is much more severe as it can hamper your capacity to earn resulting in a loss of income. You may also end up with total or partial disability causing a change in your lifestyle. The insurance company pays a lumpsum amount to the insured if he is diagnosed with any such critical illness which is covered under the policy, irrespective of whether he is hospitalized or not. A health insurance policy usually has several sub-limits and restrictions, which sometimes will not even compensate you completely for the expenses you incur. In such a case a lumpsum payment gives you the freedom to spend it as you wish. Hence the importance of a critical illness policy cannot be over-emphasised.
How to pick the right policy?
While choosing a critical illness policy, choose a policy which covers the maximum number of illnesses. If there is a family history of a particular illness, make sure the policy covers this illness, as you are more susceptible to getting this. Also consider the extra benefits and features which policies offer. When you evaluate a cover size, don’t forget to consider the average cost of treating major critical illnesses, taking into account the inflation factor. Understand the exclusions under the policy and choose a policy with a high renewal age limit, as you are more likely to fall sick when you grow old. The fine print of a critical illness policy needs to be carefully studied before selection, as the parameters and related conditions are subject to change quite often. Last, but definitely by no means the least, choose a policy with a comparatively lower premium for similar benefits offered by a player with a higher premium. Also, remember to check the premium across different age brackets, as this is different for different age groups.
Should you opt for a critical illness policy only for yourself or for your spouse as well?
A critical illness policy is primarily a means of compensating loss in income due to the occurrence of a critical illness. However, it should not be forgotten that the cost of treating the critical illness may itself be quite substantial. Therefore, one must assess the financial impact due to the occurrence of a critical illness. If your spouse is working, then compensating for the loss in her income is important and therefore you should take a policy for him/her. Even if your spouse is not working, a policy may be important, as the financial impact to the family may be substantial if he/she is affected. Assess your situation and make a decision. Nowadays, some companies offer family floater critical illness policies, where the entire family can be covered. This may also be considered as an alternate option.
Salient Features of a Critical Illness Policy:
Critical illness policies have different options of Sum Assured, ranging from as low as Rs. 1 lakh to Rs. 50 lakh (Bajaj Allianz policy). The policy is generally required to be renewed every year by paying the annual premium. As discussed earlier, the mode of compensation by the insurer will be a lumpsum, when the illness is diagnosed, even if you are not hospitalized. Once the benefit is paid, the policy usually ceases to exist.
Most companies specify a survival period of 30 days after the illness is first diagnosed and makes the payment only after this period. There is also a waiting period of 90 days from the inception of the policy, during which period the illnesses are not covered. This period is 60 days for Bharti Axa critical illness policy and 6 months for ICICI Prudential’s Crisis Cover policy. In addition to the lumpsum payment, some policies offer periodic payments, reimbursement of hospitalization expenses, etc.
Some companies like Reliance General, Max Bupa and Bharti Axa offer a renewal bonus or a discount in premium while the policy is renewed every year. This can bode well for you, as an increase in Sum Assured makes you eligible for a higher compensation. Apollo Munich’s Optima Vital offers a discount in premium if the policy is taken for 2 years. ICICI Prudential also compensates death and permanent total disablement under this policy.
While medical check-up is not needed by most companies, there are a few policies which require a medical check-up if the insured is above a particular age limit (usually 46 years). Another feature of the critical illness policy is that pre-existing diseases are not covered under the ambit of the critical illnesses specified in the policy document. Only policies by Bharti Axa and Max Bupa cover pre-existing diseases, but that too, after 48 months of the policy’s original start date. You get a tax benefit under Sec 80D of the Income Tax Act for the premium you pay for your critical illness cover.
Should you take a standalone critical illness policy or opt for a critical illness rider?
Critical illness covers are available both as standalone policies and as riders along with life or health insurance policies. Generally while this policy is taken as a rider or as an add-on to the existing health insurance policy, it may be difficult for you to increase the Sum Assured limit at the same premium levels. The Sum Assured in such a case is generally 50% or 100% of the basic Sum Assured. The comprehensive health policy by Bharti Axa can work out to be an inexpensive option for you, as the benefits you get for the premium paid is high. While features of both a standalone plan and a rider are more or less the same, a standalone plan offers greater flexibility in choosing the Sum Assured limit.
Which policy should you buy and which should be avoided?
We have analysed critical illness insurance products of 10 companies on the basis of several parameters. Of the companies we analysed, policies by Star Health and Tata AIG due to the exorbitantly high premium levels. The premium on the critical illness policy by ICICI Prudential also is relatively high; however, this policy covers 35 critical illnesses and also covers death and disablement benefits which will be beneficial to you.
Apollo Munich’s Optima Vital policy covers the maximum number of critical illnesses and has other benefits as well. This policy can be considered, although the premium is slightly higher than the other policies. If you do not mind a low Sum Assured, you can opt for the comprehensive health policy by Bharti AXA, which brings with it a host of benefits. Other policies which can be considered on the back of low premiums and marginal benefits are Reliance General and Max Bupa. If you are not keen on the extra benefits which some policies offer, you can also choose HDFC Ergo, SBI General Insurance and Bajaj Allianz policies as the premium is low.
Our earlier analysis on this subject included critical illness policies by ICICI Lombard and National Insurance Company Limited. However, we have not included the above two in the current analysis due to non availability of sufficient information. Further, ICICI Lombard’s critical illness policy which was earlier available online is now offered only in the offline mode.
Should a critical illness policy be your top priority?
Although a critical illness policy is important, it should not be the first insurance category you must purchase. We believe a health insurance policy should first be purchased, followed by sufficient term cover to cover your life. A critical illness policy can then be opted as a supplementary cover.
A detailed comparison of the 10 policies analysed is available below. If you prefer to download the excel file, please click here. For more details, refer to individual company prospectus. Kindly note that this analysis covers offerings from major insurers only & this is not an all-product comprehensive comparison. The analysis is valid on the date being published.