Critical Illness Insurance

Critical Illness Insurance has emerged as a coveted life insurance policy as a consequence of the prevalent lifestyle in modern society. Unlike other life insurance plans, which focus on the protection of life and secure the financial future defined goals of individuals, Critical Illness Insurance confines itself to cover the consequences of life-threatening diseases, which not only require huge financial outgo but also continued monitoring over the long-term.

It is a fact of life that cardiovascular diseases, type-2 diabetes, obesity, or certain classes of cancer have been the bane to modern society arising out of various factors like stress, eating habits involving junk and processed foods, and a sedentary lifestyle to boot. Furthermore, the age of affliction of such diseases is getting lower, making the new generation vulnerable to its debilitating effects. These diseases are only indicative, as any Critical illness Cover extends to many more diseases making it essential for individuals.

Ever since the inception of the insurance sector by the Government of India in 2000, many international insurance giants have made a foray into the country in Joint Ventures offering innovative Insurance products, of which Critical Illness Health Insurance is one. Thus, it is imperative within the norms of financial planning, to choose a suitable Critical illness policy from the many available in the market.

What is a Critical Illness Plan?

Critical illness can be defined as any illness, disease, or health condition considered to be life-threatening in the long run and thus requires uninterrupted comprehensive care and monitoring, often in intensive care. Some of the common diseases that fall in this category are heart-attack, kidney failure, cancer, multiple sclerosis, and paralysis.

Critical Illness Policies are designed to extend a defined benefit in the form of a lump-sum amount on diagnosis of any of the listed diseases and surgeries covered by the insurer. They are delivered as a stand-alone product or as an add-on with existing health insurance and products with similar features. However, a stand-alone critical insurance policy offers greater flexibility in terms of policy tenure and sum assured than a critical illness rider, opted as an add-on to other health insurance plans.

A Critical Insurance Policy can be bought from any of the insurance providers ranging from General Insurance, specialized Health Insurers, and Life Insurance companies. It is unlike a health insurance or mediclaim that operates on the principle of meeting hospital medical expenses, either through cashless or reimbursement facility.

The ambit of the Critical Insurance Plan, on the other hand, pays a lump-sum amount or staggered payment as agreed upon to the extent of the sum assured on diagnosis of any of the listed critical illnesses. The number of illnesses covered varies from insurer to insurer. Furthermore, the usage of the pay-out is not restricted in the case of critical illness insurance and can be used to compensate for the loss of income, pay medical bills, or even liquidate existing debts.

Why Choose Critical Illness Plan?

Indians indeed face the threat of lifestyle diseases for underlying factors prevalent in modern society. Global and national experts have opined that one out of every four Indian is vulnerable to non-communicable diseases like cancer, cardiovascular ailments, diabetes, and afflictions of major organs in the body, restricting life expectancy to 70 years or less.

These diseases take a toll not only on the body but also on one's finances in the long run. This is because, though they are life-threatening, the survival rate is also high, causing a perpetual drain on savings. An interesting illustration for Indians concerning critical illness survival is an eye-opener.

These being the survival rates in critical illnesses, there is a major element of the cost involved. Proper treatment requires both time and money.

Only suitable critical illness insurance can compensate for the continuing cost of recurring medical expenses. To top it, one also has to cope with medical inflation of 10% to 12%.  A mediclaim will only partially meet the need, as it caters to hospitalization expenses only and not the expenses likely to be incurred in the long run. In such a scenario, it is not only wise but also smart to buy a critical illness plan in addition to a mediclaim or health insurance as a buffer, for relief from financial worries to help focus on one’s health.

Since the pay-out in critical illness policy is a lump-sum amount on diagnosis, it can take care of the following, without making a dent in the savings.

Financial Shield for Treatment:

Sustaining the recurring cost of treatment is a huge burden to have. This is mitigated by the lump-sum payment made.

Provide Financial Back-up:

Poor health due to critical illness and its costly treatment is likely to adversely impact income. Instead of dipping into the savings and investments, critical illness insurance can provide financial stability to overcome the shortfall.

Safety Net from Debts:

There are instances when the costly treatment necessitates liquidation of all assets, leading to further debts. Critical illness insurance pay-out can provide the safety net in such a scenario.

Provide Peace of Mind:

The onset of any disease is unpredictable, leave alone critical illness. Planning for such an eventuality with suitable critical illness insurance can provide the requisite solace that financial distress is well covered.

Thus, critical illness insurance is a cover to protect from the affliction of listed life-threatening ailments and a buffer to overcome financial woes. Choosing the right plan requires enough insight into the working of critical illness plans in general and the coverage in particular, considering the availability of a plethora of plan options on offer.

Having understood the necessity for a critical illness insurance policy, it is not out of place to look into who should necessarily opt for a suitable plan. It is because the incidence of critical illness is on the rise in India. Statistics about Indian health are revealing. According to the World Health Organization (WHO):

• The current Diabetic population in India is about 62 million. It is likely to rise to 109 million by 2035.
• Death caused by heart diseases in India every year number about 1.7 million.
• The incidence of Cancer among Indians in the year 2014 was 70 to 90 per 1,00,000 persons. It rose to 106.6 for the same population size in 2016.
• Respiratory causes account for 7% of deaths in India, pointing at the alarming levels of pollution.

Evident from above, lifestyle trends in India have been affecting a larger number of people with life-threatening diseases. A financial back-up to absorb the financial burden is a resort for the vulnerable population. Critical illness insurance is thus, eminently suited for the following:

Persons with a family history of Critical illnesses:

It is believed that most critical illnesses are genetic. Family history points to the risk of inheritance of such ailments. It is smart for such individuals to look for viable critical illness insurance option for protection in advance.

Sole breadwinner of the family:

Such individuals with a family history of critical illness and sole breadwinner have to organize financial protection of the dependents against critical illness.

Types of Critical illness Plans:

Critical illness plans are distinctly different from other health insurance plans termed as mediclaim in general. A typical critical illness insurance policy pays a sum assured in lump-sum on the diagnosis of listed diseases in the policy document. It is a compensatory financial buffer for treatment and loss of income in the long run, without restrictions on fund usage. 

Mediclaim, on the other hand, takes care of the hospital bills incurred for the treatment of the life-threatening disease. Thus, critical illness insurance can be termed as a defined benefit plan as the payment of sum assured is guaranteed, regardless of hospital expenses. This enables the policyholder to cater to the cost of care and treatment, recuperation, and, additionally, liquidate debts, if any. A mediclaim policy works on the principle of indemnity, reimbursing the exact expenses incurred.

A critical illness insurance plan is classified on two parameters. They are:

• Policyholder
• Nature of Critical Illness Plan

• Policyholder:

  Based on this, the critical illness plan is classified as under:

  Individual:

  The features and benefits are limited to a single person as an individual.

  Family:

  The Health Care cover is extended to the entire family, and the benefits are enjoyed by all the members of the family, including dependent parents, within the defined terms and conditions in the policy document.

• Nature of Critical illness Plans:

  Based on the nature of the critical illness plan, it is divided into:

  Standalone Critical Insurance Policy:

  It is an independent policy in itself, which is designed to deliver a host of benefits with flexible features.

  Critical illness Rider:

  It is an optional feature offered as an add-on with other base life or health insurance policy, and the benefits are restricted to the base policy. Thus, in many ways, the scope is limited in the rider.

  A Standalone Policy or a Critical Illness Rider as an add-on to a base Life Insurance or Health Insurance Plan differ in a range of parameters, needing a comparison between the two. Both provide for cover against critical illnesses, yet the difference is remarkable.

The choice between the two is fully dependent on the requisites of the policyholder. If one is looking for higher coverage and is willing to shell out a higher premium, which will go up with every renewal, standalone critical illness insurance is the choice. On the other hand, if one is comfortable with lower cover and cheaper option, then critical illness rider will suffice.

Critical Illness Policies Comparison:

Disclaimer: *Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.

Factors to Consider while choosing Critical Illness Plans:

A mere understanding of the importance of critical illness insurance is not enough when it comes to the crux involving the purchase of the best critical illness policy. It needs proper weighing of all the pros and cons before making an informed choice. Accordingly, proper evaluation of the factors involved is necessary to lead to a firm decision.

• Cover Size:

  It is of critical importance to ascertain the cover amount, and there is no standard yardstick. It is ideal to have a cover size of Rs.10 Lakh at the minimum. There are suggestions that a typical cover should be 4 to 5 times the annual income. It makes sense to go in for a higher cover amount if affordability of higher premium is not an issue; considering that it will be incremental with age going up in the future.

• Illness Coverage:

  The number of illnesses covered in critical illness plans varies with insurers. The range is wide for one to discern. It is wise to seek a balance as the thumb rule is that the higher the number of illnesses, the higher the premium. Some may list the same organ in different diseases, or the same disease is split to fool the policyholder. A general list of illness covered is tabulated for an idea into the range:

  Type I	Type II	Not covered
  Heart Attack	Paralysis	Smoking or Drug Intake
  Stroke	Coronary Bypass Surgery	Dental or Cosmetic Surgery
  Cancer	Loss of Limbs	Infertility Treatment
  Coma	Kidney Failure	HIV AIDS Infection
  	Severe Burns	Treatment abroad
  	Parkinson’s Disease	Internal or External Congenital Disorder
  	Alzheimer’s	Hormone Replacement Therapy
  	Blindness	Reproduction Treatment
  	Loss of speech	Pregnancy and Childbirth
  	Major Organ Transplant
  	Multiple Sclerosis
  	Motor Neuron Disease
  	Muscular Dystrophy
  	End-Stage Liver Disease
  	Benign Brain Tumor
  	Aplastic Anemia
  	Heart Valve Replacement
  	Bacterial Meningitis
  	Aortic Disease

  The list is not exhaustive, but it gives an idea to the coverage extended by insurers in critical illness insurance India plans. Some insurers categorize the critical illnesses as Life-Threatening and Life Disabling according to weight as Type I and Type II, as the case may be. It is for the policyholder to scan the list of illnesses covered in critical health insurance before committing for purchase.

• Definition:

  A major roadblock to understanding a critical illness policy is the medical jargon used in the policy document. It may not suffice for the policyholder to comprehend them without the assistance of a medical professional, typically the house physician, to unravel the complex medical terminology.

• Sub-Limit:

  Insurers impose sub-limits in specific diseases. As an example, if a sub-limit for Heart Attack is fixed at Rs.5 Lakh, a like sum will be paid on diagnosis irrespective of the sum insured. The policy will, however, continue with a cover reduced by Rs.5 Lakh. 

• Renewal:

  It is ideal to look for critical illness insurance that allows renewals for the long term or whole life. It is to counter the possibility of premium going up with age.

• Exclusion:

  It is an essential aspect of any critical illness plan. Usually, pre-existing diseases are considered for a claim after a waiting period of 36 or 48 months and are insurer specific. Immediate cover for pre-existing diseases raises the premium proportionately. This apart, it is imperative that scrutiny is made for other exclusions before a decision is made.

• Premium Cost:

  Increased benefits raise the cost of the premium, as nothing comes for free. It is thus, essential to understand specific individual requirements and plan accordingly. As the premium is age-related, it should be factored to maintain premium affordability.

• Survival Clause:

  The downside in critical illness insurance is the disease-specific survival clause.  Often, pay-outs are released subject to waiting or survival period in the range of 30 days for Type I, 60 days for Type II, and 90 days for Quadriplegia. Since claims are not entertained during the survival periods defined for each critical disease specified by them, a policyholder must be aware of the complexities involved.

• Claim Settlement Ratio:

  A high CSR raises confidence in the policyholder for acceptance of a claim and its approval, rather than repudiation. It is an indicator of the performance of an insurer under the watch of IRDA, the insurance regulator in the country. 

• Standalone or Rider: 

  There are inherent advantages in both, but a balance is drawn specific to an individual’s needs. A standalone critical insurance plan scores over the rider for the element of flexibility in cover and range. There are disease-specific standalone plans for Cancer and Heart, but a plan with multiple illnesses is always preferable.

Documents Required to Apply for Critical Illness Insurance Plans

The application process for critical illness insurance across all insurers mandates the submission of documents. For general information, the following list is indicative of the type of documents that the policyholder needs to submit, irrespective of insurer specific document:

• Proposal Form:

  It is insurer specific form designed to elicit all information relevant to the critical illness plan sought to be purchased. Apart from all the personal details, it also seeks information on the health profile of the applicant. 

• Photograph:

  Recent passport size

• Identity Proof:

  It is a KYC measure to ascertain the identity particulars of the applicant. Anyone from the list of valid ID documents including

  • Voter Card
  • PAN Card
  • Aadhaar Card
  • Driving License
  • Passport

• Age Proof:

  Proof of age is another KYC measure to determine the authentic age of the applicant to fix the policy parameters. For the premium, the amount of age is a crucial factor. Lower the age; lower is the premium amount. Any of the valid documents accepted as age proof is:

  • Birth Certificate
  • Driving License
  • Passport
  • Voter Card
  • Aadhaar Card
  • PAN Card

• Residential Address Proof:

  It helps ascertain the permanent address of the applicant. Any of the valid ID cards stated above, which has the registered address, besides current utility bills like Electricity, Telephone, etc. are entertained by the insurer.

• Income Proof:

  It depends on the profession of the applicant.

  Salaried: Salary Slips for specified periods as per insurer, Form 16 and ITR, again for specified periods.

  Self-Employed: P&L Statement, Balance Sheet, ITR and Bank Statement fort specified periods defined by the insurer.

  As already stated, the list of documents described is not exhaustive but only indicative. The insurer is free to seek any other document over and above this, being specific to a particular plan.

Eligibility Criteria for Critical Illness Insurance:

The eligibility criteria across insurers related to Critical Care Insurance is fairly uniform. The maximum entry age is restricted to 65 years in most plans, and the policy term is also primarily 1 year, which in some cases are 2 or maximum 3 years.  However, most insurers offer lifelong renewability barring a few, like Star Criticare, where 70 years is the maximum age for renewal.

Features and Benefits of Critical Insurance Plans

There is a host of redeeming features spread across critical illness insurance plans offered by a variety of insurers. This plan should not be confused with health insurance. The basic distinguishing feature between the two is in the treatment of claim settlement.

While a critical illness insurance plan pays the entire sum insured on the diagnosis of the listed critical illness, health insurance is an indemnity with assurance to reimburse the exact hospital expense incurred within the overall limit of sum insured. Every insurer has a few features unique to them. However, in broad terms, there several features that apply to all plans.

Features:

Listed below are the salient features of critical illness plans:

• Every critical illness plan provides lump sum pay-out on the diagnosis of critical illness listed in the policy document.
• The pay-out is not expensed specific but is designed to mitigate the financial burden of the policyholder concerning recurring medical expenses, supplement day to day household expenses affected by the loss of income due to ill-health and also liquidate the existing debts and prevent fresh debts to meet the shortfall.
• The premedical test is compulsory, typically for those above a threshold age, usually 45 years.
• Survival clause post-diagnosis is a normal feature across all insurers with the period ranging from 30 to 90 days or more for specific ailments. This is one of the drawbacks of critical illness insurance, which a policyholder needs to consider meticulously. However, in Religare and Star Criticare, this clause is absent.
• Coverage extends to day-care procedures, which is a modern healthcare trend due to advanced technology. Dialysis is one procedure that can be easily undertaken in a day-care facility.
• The sum insured amount can be changed during renewal on the policy anniversary, subject to the approval of the insurer.
• Pre-existing diseases are treated as normal exclusions in a critical illness policy, except for a few who extend coverage to these diseases after a waiting period of either 36 or 48 months.
• Policies can be taken either for the individual or the family where the coverage is available to the spouse, children and sometimes parents.
• Every insurer permits a Free-Look period for the policyholder to return the policy and seek a refund if not satisfied. Normally, the period is 15 days from the receipt of the policy document.

Benefits:

Listed below are the core benefits of critical illness plan:

• It is a form of financial security to the dependents when they are shielded from financial ruin, upon the policyholder being diagnosed with critical illness.
• Full sum insured pay-out on the diagnosis of a critical illness suffered by the policyholder.
• Multiple options to choose policy term, the sum insured and premium to suit individual requirement.
• Pre-hospitalization expenses up to 30 days are permitted in most critical illness plans.
• Second opinion facility is extended by almost all insurers to get clarity on the diagnosis from specialists.
• Hassle-free claim settlement process and easy documentation for a seamless claim experience.
• Lifetime renewability is a benefit accorded by almost all insurers.
• There is a facility to add riders to augment the cover amount.
• Tax benefits under Section 80D of the Income Tax Act, 1961. Individuals get a maximum rebate of Rs. 25,000 if not a Senior Citizen, else it is Rs.30,000. Additionally, for senior citizen parents, the exemption amount is a maximum of Rs.30,000.

Inclusions and Exclusions of Critical Illness Insurance Policy

The policyholder must look for the best features while choosing the best critical illness plan. The primary way to ascertain the suitability of the policy is to go through the fine print of the policy document to comprehend the inclusions and exclusions that may mar the claim.

While the inclusions in critical illness policies are the scope and range of illnesses listed, the exclusions are far more complex. The number of critical illnesses covered by an insurer varies widely. It is wise to pick a plan with a wide range of critical illnesses on the list, even if the premium is higher. Some of the major exclusions applied to critical illness insurance are as follows:

Exclusions:

• Persons with HIV / AIDS / STD infections.
• Any illness attributed to smoking, tobacco, alcohol, intoxicants, and drugs.
• Treatment obtained abroad.
• Failure to seek timely medical advice for a disease.
• Issues related to pregnancy and childbirth.
• Treatment for conditions related to infertility.
• Treatment-related to dental care and cosmetic surgery.
• Any internal or external congenital disorder.
• Treatment required after participation in criminal activity.
• Treatment-related to the state of war, conflict, hostilities, terrorism and military operations.
• Indulgence in adventure and extreme sports.
• Radioactive and nuclear contamination.
• Pre-existing diseases before completion of waiting period, if any.
• Death during the survival waiting period defined for specific diseases.
• Critical illness diagnosed within 90 days from the inception of the risk.

Claim Process in Critical illness Insurance:

The claim settlement process is an important factor for the popularity of the insurer and its products. The initial parameter to check is the Claim Settlement Ratio achieved by the insurer in a financial year, authenticated by IRDA. The primary intent is to provide a seamless experience to the claimant. A claim can either be lodged Offline or Online.

Offline: Through the nearest branch of the insurer, their Toll-Free number or their Email ID.

Online: at the insurer portal which has an option for claim intimation.

For a claim related to critical illness insurance, it is best done within seven days of the diagnosis or discharge from the hospital. To ensure a seamless experience, the following needs to be compulsorily complied with:

• Duly completed signed claim form.
• KYC documents for identity, age and residence proof.
• Medical Certificate confirming the diagnosis from a Medical Practitioner, not below MD/MS.
• Investigation reports and related documents related to the diagnosis of critical illness.
• Original Discharge/Day-care summary from the hospital.
• Bank details along with a cancelled cheque for NEFT remittance.
• Any other document that may be called for depending on the nature of the claim.
• It is safe to keep a copy of all the documents for future reference.
• All insurers provide hand holding for claim settlement.

Renewal Process of Critical Insurance Policy:

Most critical illness insurance policies come with a lifetime renewal facility barring one or two. The continuity of the cover is ensured by paying the renewal premium on or before the due date. The renewal premium is subject to revision in the following circumstances.

• Addition of person for cover.
• Change in the coverage provision.
• Increase in the age of the policyholder. In the case of Family Floater plans, the age of the principal insured is considered.
• There is a change in the residential address in a different PIN code.

Renewal premium can be submitted at the brick and mortar office along with a cheque/DD or paid online at the insurer/aggregator portal.

How to Buy Critical Illness Insurance Plan?

The first question that comes to mind is where to buy the best critical illness insurance. It can be done from General Insurer, Standalone Critical illness Health Plan provider, or a Life Insurance company. While making an informed choice, check out some smart buying tips to help.

Ensure Adequate Cover: It is necessary to absorb the high cost of critical illness treatment.

Check the listed Critical illnesses: Look for maximum coverage to ensure comprehensive cover.

Study all Survival and Waiting Period Clauses: It is prudent to opt for liberal insurers.

Check Sub-limits: These are restricting clauses limiting the claim amount. It is ideal to go in for zero or minimal sub-limits.

Lifetime Renewability: It is ideal for enjoying the fruits of Critical illness cover for a long time when the medical bills keep growing.

Buy Online to Compare Plans: It is the best option adding flexibility to the purchase experience, either at the insurer or aggregator portal.

Once the parameters are considered, the following steps are sufficient to complete the process of the online purchase of the Critical illness Policy.

Select Plan: The initial step is to use the Online Health Insurance Calculator to arrive at the ideal premium for the chosen sum insured for a suitable tenure.

Add Riders: It is optional to choose riders to enhance financial protection at an extra cost.

Pay Premium: After the selection of the best option, personal details are needed to be input before the premium is paid.

Complete Proposal Form: It is the document that seeks lifestyle and health/medical details and an extension of Application Form.

Submit Documents: With the submission of documents, the next step is medical tests, after which the purchase is finally over.

Critical illness Insurance FAQs: