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What is Critical Illness Policy?

A critical illness policy offers a lump-sum payout upon diagnosis of covered conditions, providing financial security during challenging times.

  • 3,928 Views | Updated on: Apr 07, 2024

A critical illness policy is a type of insurance plan designed to provide financial protection to the policyholder if they are diagnosed with a serious illness or medical condition listed within the policy. These illnesses typically include major conditions such as cancer, heart attack, stroke, organ transplant, kidney failure, and other life-threatening diseases.

As modern living becomes stressful, coupled with unhealthy eating habits, there is a rise in the number of people being affected by such critical illnesses. You may also face financial difficulties due to loss of income and high treatment costs. To protect yourself and your family from financial difficulties during an emotionally stressful situation, it is important to avail yourself of a critical illness policy.

Benefits of a Critical Illness Policy

If you have considered the consequences on your family in case you are unable to earn due to any serious medical condition, you understand the importance of the benefits critical illness insurance provides. These benefits include the following:

Financial Protection

A critical illness policy provides a lump-sum payment upon the diagnosis of a covered critical illness. This payment can help cover medical expenses, treatment costs, and other financial obligations, such as mortgage payments, household bills, or childcare expenses.

Flexibility

The lump-sum payment received from a critical illness policy can be used in any way the policyholder sees fit. They have the flexibility to use the funds for medical treatment, rehabilitation, lifestyle adjustments, or any other expenses that arise due to the illness.

Supplement to Health Insurance

While health insurance typically covers medical expenses, it may not fully cover all costs associated with a critical illness. A critical illness policy can supplement health insurance by providing additional funds to cover out-of-pocket expenses, experimental treatments, or other non-medical costs.

Income Replacement

In many cases, a critical illness can result in the inability to work for an extended period. The lump-sum payment from a critical illness policy can help replace lost income during this time, ensuring that the policyholder and their family can maintain their standard of living.

No Restrictions on Use

Unlike some other types of insurance, there are typically no restrictions on how the funds from a critical illness plan can be used. Policyholders have full control over how they allocate the money to meet their specific needs and priorities.

Difference Between Critical Illness Insurance and Health Insurance

While choosing insurance plans, you come across various options, including a pure health insurance plan and a critical insurance policy. These plans may sound similar; however, they are different from one another. Let us take a quick look at how they differ from each other:

Feature

Critical Illness Insurance

Health Insurance

What it Covers

Specific critical illnesses like cancer, heart attack, stroke, etc.

Wide range of medical expenses, including doctor visits, hospitalization, surgery, prescriptions, etc.

Benefit payout

Lump sum payment upon diagnosis of a covered critical illness

Covers a portion (usually a percentage) of approved medical bills

Purpose

Provides financial support to cover out-of-pocket medical costs, lost income, or debt repayment due to a critical illness

Helps manage ongoing medical expenses and protects against unexpected high medical bills

Premiums

Generally higher premiums due to the specific coverage and potential for large payouts

Premiums vary depending on plan type, deductible, and coverage level

Claims process

Typically easier claims process with clear criteria for covered illnesses

Claims process can be more complex and may involve denials based on policy exclusions

Focus

Financial protection in case of a critical illness

Managing ongoing healthcare costs

Inclusions Under Critical Illness Plans

Critical illness plans typically cover a wide range of serious medical conditions, but the exact list can vary depending on the specific plan and insurance company. Most critical illness plans cover anywhere from 30 to 50 critical illnesses.

Types of Covered Conditions

  • Major Cancers: Different stages of cancer are often covered, with some plans specifying the severity.
  • Heart Diseases: This can include heart attack, coronary artery bypass surgery, and valve replacement surgery.
  • Stroke: Some policies also cover stroke resulting in permanent neurological damage.
  • Organ Failure: This can include kidney failure requiring dialysis, liver failure, and lung failure.
  • Major Organ Transplants: Coverage may extend to bone marrow transplants as well.
  • Neurological Conditions: Some plans cover conditions like Alzheimer’s disease, Parkinson’s disease, and motor neuron disease.
  • Musculoskeletal Conditions: Critical illness plans may cover certain severe musculoskeletal conditions like permanent paralysis of limbs.

Several other conditions may be covered by various insurance companies. You must read the policy document carefully to avoid any unpleasant surprises in the future.

Exclusions Under Critical Illness Plans

Critical illness plans cover a long list of illnessess; however, there are some conditions when Some illnesses are not covered under a critical illness insurance plan. Take a look at the list below:

  • Any diseases causing the demise of the insured during the specified survival period assessed from the onset of the condition.
  • Any medical operation or treatment that is not medically necessary or is not administered by a medical practitioner.
  • Any congenital diseases or conditions.
  • Any covered critical illness resulting from birth control treatments and/or hormone replacement therapy, as well as any sequelae.
  • Any treatment/surgery for gender transition or aesthetic surgery, as well as any complications/illness resulting from such treatment/surgery.
  • Other covered critical illnesses resulting from treatment by a family member and self-medication or any treatment that is not scientifically recognized.
  • Any covered critical illness resulting from treatment with alternative medicines such as Ayurvedic, Homeopathy, Unani, acupuncture, acupressure, osteopathy, naturopathy, chiropractic, reflexology, aromatherapy, and the like, as well as any complications developing from there.
  • Suicide attempt (sane or mad) or intentionally self-inflicted injury or illness
  • Sexually transmitted diseases, mental or nervous disorders, Acquired Immune Deficiency Syndrome (AIDS), and HIV infection

Considerations While Buying a Critical Illness Plan

When buying a critical illness plan, several considerations are essential to ensure you get the most suitable coverage for your needs:

Coverage Options

Review the list of critical illnesses covered by the policy. Ensure it includes illnesses relevant to your health risks and family history. Look for policies with comprehensive coverage to protect against a wide range of conditions.

Policy Terms and Conditions

Carefully read and understand the terms and conditions of the policy, including coverage limits, waiting periods, exclusions, and renewal provisions. Pay attention to any restrictions related to pre-existing conditions or family medical history.

Sum Assured

Determine the appropriate sum assured based on your financial obligations, such as medical expenses, living expenses, debt repayments, and income replacement needs. Ensure the coverage amount is sufficient to provide adequate financial support in the event of a critical illness diagnosis.

Premiums and Affordability

Compare premium rates from different insurers and select a plan that offers competitive pricing while providing comprehensive coverage. Consider your budget and ensure the premiums are affordable in the long term, as Critical Illness Plans are usually long-term commitments.

Waiting Period

Understand the waiting period specified in the policy, during which no benefits are payable after purchasing the plan. Choose a plan with a waiting period that aligns with your needs and financial situation.

Claim Process

Evaluate the insurer’s claim settlement process, including documentation requirements, claim submission procedures, and turnaround time. Select an insurer known for prompt and hassle-free claim settlements to avoid complications during a critical illness diagnosis.

Insurer’s Reputation

Research the reputation and financial stability of the insurance company offering the critical illness plan. Choose a reputable insurer with a strong track record of customer service and claim settlement to ensure reliability and peace of mind.

Wrapping it Up

Critical illness coverage is vital today as the number of people affected by such conditions is increasing. Moreover, due to stress, many people in the young age group are being affected by critical illnesses. Therefore, such a policy is crucial to protect you and your family against financial difficulties in case of a critical illness.

Key Takeaways

  • The need for critical illnesses is increasing, leading to potential financial difficulties such as high treatment costs and loss of income.
  • It provides additional funds beyond what health insurance may cover upon diagnosis of covered conditions.
  • While health insurance covers a wide range of medical expenses and ongoing healthcare costs, critical illness insurance focuses on providing financial support for specific critical illnesses.
  • Certain conditions/treatments are not covered, such as congenital diseases, self-inflicted injuries, mental disorders, and alternative medicine treatments.
  • Always determine the appropriate coverage amounts based on financial needs, compare premiums, and consider long-term affordability.

FAQs


1

Can I cancel my critical illness policy if needed?

Yes, most insurers allow policyholders to cancel their critical illness policy, but terms and conditions may apply. It’s recommended to review the policy document or contact the insurer for cancellation procedures and any associated fees.



2

Will my premiums increase over time?

Premiums for critical illness plans may increase over time due to factors such as age and changes in health status. Some policies offer level premiums, while others may be subject to periodic adjustments. It’s essential to understand the premium structure before purchasing the policy.



3

Can I purchase a critical illness policy if I already have health insurance?

Yes, you can purchase a critical illness policy alongside your existing health insurance to supplement coverage and provide additional financial protection against critical illnesses.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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