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Why Critical Illness Rider is needed with Term Plan

Uncertainties in life seem to be rising every day. Caught in an entangled future, insurers are convinced of having a term insurance policy. It is the most affordable financial protection. Insurers feel financially secured. They attribute it to the high coverage benefits with affordable premiums.

What is a Term Plan?

A term plan is a financial coverage that is provided for a certain period. If the holder expires during the tenure of the policy, the beneficiaries can utilize the death benefits. 

The insured can benefit a lump-sum assured over a fixed period. An investor aged 30 years can look for coverage of Rs 50 Lakh. He can cover it within 30 years with a minimum premium of Rs 13,000. Thus, the breadwinner of the family can achieve his financial goals. The premium can be started at an early age. 

What is a Critical Illness Rider?

A term plan is complemented with a critical illness rider option. This feature ensures an assured sum at the time of chronic illness. It is financial assistance provided for specific conditions that are listed in the policy.

Benefits of Critical Illness Rider

The term insurance policy includes death benefits and income tax benefits. The critical illness coverage is an additional benefit to the policy. So the plan can provide support either at the time of death or during chronic illness. 

The diagnosis and treatment for all chronic ailments can cause a financial burden. Equipping your term policy with a chronic illness plan will cover your treatment expenditures. This rider is a prerequisite for rising medical emergencies. 

An unfortunate illness arises unannounced. It can occur at a time when the family has other financial obligations such as kid's education, home loans, amongst others.

Having the term insurance policy solely will be inadequate as they do not cover medical expenses. They provide help at the time of death of the insured.

Other benefits of opting this critical illness rider are:

  • The premium remains the same even if the policy buyer opts for this rider.
  • The rider can be used as an income at the time of illness.

  • The premiums carry dual tax benefits for holding both term policy and the rider. The tax benefits come under Section 80 C and 80D of the Income Tax Act.

Additional Rider

If a term plan offers a sum of five lakhs to the insured as a family floater, the treatment costs for chronic diseases would be much higher. 

With this rider, the insurer can continue with the basic plan once the payout is made for the treatment.

Some of the significant critical ailments listed by policyholders are:

  • Paralysis
  • Cancer

  • Stroke

  • Kidney Failure

  • Organ transplants

  • Coronary artery by-pass surgery

  • Other terminal illnesses

All major illnesses are included in this rider. The coverage for such illnesses is generally excluded in a standard health insurance policy. This makes the need for having a health rider more critical, along with the term policy.

A recent study by the Global Burden of Disease has shown that cardiovascular diseases are the highest risk factors for death. These include COPD, stroke, and ischemic heart diseases. They are the most prevalent cause of death amongst Indians.

How to apply for the Rider?

The convenience of applying online through the policy provider's online sites has made the application easy. The purchase and renewal of the plan can be made through these online platforms. Insurance companies also provide customer service support. 

Exclusions of the Rider

Although the additional benefit rider provides total coverage for specific conditions, there are certain exclusions:

  • Any hereditary condition or pre-existing condition cannot be claimed.
  • The claim can be processed only if diagnosed after a minimum waiting period.

  • The payment can be claimed if the policyholder has survived within a specified period after the diagnosis. The survival period differs with the type of illness listed by the policy.

How does the Rider Function?

A lump sum amount is paid on diagnosis of chronic ailment. This is equal to the sum insured. The fixed amount will vary depending upon the amount paid by the insured. This lump sum amount can cover the treatment costs. It provides coverage for expenses during the recuperation phase. The tax-free payout covers other liabilities such as mortgage or debts if incurred during the illness.

Compare to Other Plans?

Investors should be aware of the preconditions of the rider and compare riders with other policies. Comparison can be made online for the coverage amount and the number of illnesses covered. Other criteria, such as the free-look period, survival, and waiting period, and the sum assured can be compared using the online calculator.

Things to Consider While Buying the Plan

When buying this additional benefit, along with the term policy, the buyer should understand all the aspects of the rider.

Certain points that need to be looked upon are:

  • Minimum survival period and benefits paid upon the first diagnosis

  • Claim settlement time of 21 days after the submission of documents

  • The minimum waiting period after diagnosis

  • The assured benefit amount paid to the insured in the event of death or permanent disability

  • Easy processing through the online form

  • The coverage for illness should be equal to the lump sum payable to the insured

  • On recovering the claim for a specified condition, the term policy should continue
  • The maximum tenure of 30 years

The premium amount can be determined by keeping in mind a few factors:

  • Age of the holder

  • Family medical history

  • The income of the holder
  • Occupation

Healthy people often assume they need not take additional riders since they already have a health insurance policy. Exorbitant costs arising from life-threatening ailments can fall short of the health policy.

It is essential to realize that the rider and the health insurance plan functions differently. A single breadwinner will be devastating if not insured wisely with additional riders.

Let us take the case of cancer deaths in India. Oral, lung, and breast cancers itself account for 75% of deaths in India. The cost of treatment is more than 25 lakhs. The critical ailment rider with the term policy can prepare the insured well ahead. The family would be able to handle the situation with much calmness. 

All these factors make it imperative to go for the additional rider along with the term policy. The quality of life can be maintained without much burden to the family members.

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