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Critical Illness Insurance

Critical illness term insurance offers a lump-sum payout upon diagnosis of covered conditions, providing financial security during challenging times. With a critical illness policy, you can focus on recovery without worrying about the financial burden of treatment and other expenses.

  • 21,728 Views
  • Updated on: Nov 27, 2024
Explore Critical Illness in Term Plan

What is a Critical Illness Insurance Cover?

Critical illness insurance is a special type of insurance that provides financial support if you are diagnosed with serious health conditions like cancer, stroke, or kidney failure. Unlike regular health insurance that covers only hospital expenses, this insurance gives you a lump sum amount upon diagnosis. This amount can be used for various reasons, from paying for treatments and medications to covering daily expenses or paying off loans.

Why is it important? Life-threatening illnesses usually need expensive and long-term treatments that can drain your savings. Critical disease insurance provides a financial cushion to you that helps you focus on recovery instead of worrying about money.

For instance, conditions like heart disease, cancer, or strokes impact vital organs like the heart, lungs, and brain. This often requires frequent hospital visits or advanced treatments. A critical disease plan ensures you get the necessary care without risking your finances. So, whether you add critical insurance coverage as a rider to your existing health policy or buy it separately, it is an essential step toward securing your financial and medical future.

Benefits of a Critical Illness Policy

If you have ever wondered how a serious illness could affect your family’s finances, you likely understand the significance of critical disease insurance. This type of insurance offers a range of invaluable benefits designed to support you during tough times by offering benefits that protect both you and your loved ones. Here is a closer look at the significant benefits provided by critical illness in term insurance:

Financial Protection

A serious illness policy offers a lump sum payment upon the diagnosis of a covered serious illness in term insurance. This payment can help you cover medical expenses, treatment costs, and various other financial obligations such as mortgage payments, household bills, or childcare expenses.

Flexibility

The lump sum payment received from a critical disease policy grants you unparalleled flexibility in its usage. You have the autonomy to utilize the amount for medical treatment, rehabilitation, lifestyle adjustments, or any other expenses arising due to the illness, ensuring tailored support based on individual needs.

Supplement to Health Insurance

While health insurance typically covers medical expenses, it may not suffice to cover all costs associated with a serious disease. A critical illness term insurance serves as a supplement to health insurance by offering extra funds to cover out-of-pocket expenses, experimental treatments, or other non-medical costs.

Income Replacement

A serious illness could mean you are unable to work for an extended period. The lump sum payment from a critical disease policy can help replace your lost income so you can keep up with bills and ensure your family’s needs are met.

No Restrictions on Use

Unlike certain other types of insurance, critical disease policies generally impose no restrictions on how the funds can be utilized. You have full control over allocating the money to meet your specific needs and priorities, ensuring personalized support tailored to your circumstances.

Tax Benefits

In addition to offering financial protection, critical illness policies provide you with tax benefits. The premiums paid towards the policy are eligible for tax deductions under Section 80D of the Income Tax Act, 1961, thereby incentivizing individuals to invest in their health and well-being.

Affordable Premiums

Despite providing comprehensive coverage and substantial financial protection, critical disease policies are famous for their affordability. With competitive premiums and flexible payment options, these policies ensure that individuals from diverse backgrounds can access the benefits of comprehensive health coverage without burdening their finances.

How to Avail Critical Illness in Term Insurance?

Integrating critical insurance coverage in your term plan can help enhance your financial safety net, providing comprehensive protection against both mortality and severe medical conditions. Here is a detailed guide on how to avail critical disease coverage in term insurance:

Select the Base Policy Along with the Assured Sum Amount

Begin by selecting the base term insurance policy that suits your needs in terms of coverage amount and duration. The assured sum amount determines the payout your beneficiaries will receive in the event of your demise during the term plan.

Select the Critical Illness Benefit Rider

Opt for the serious illness benefit rider offered by your insurance provider. This rider provides additional coverage specifically for critical illnesses, supplementing the base term insurance policy. Ensure that the critical disease rider covers the specific illnesses you are concerned about or that are prevalent in your family history.

Complete Payment of Premium

Pay the premium amount required for both the base term insurance policy and the critical illness rider. Timely payment of premiums is essential to keep the policy active and ensure coverage in the event of a claim.

Fill out the Proposal Form

Complete the proposal form provided by the insurance company, providing accurate and truthful information about yourself and your medical history. Any discrepancies or inaccuracies in the proposal form could lead to complications during the claim process.

Complete Medical Tests

Undergo medical tests as required by the insurance company. These tests help assess your current health status and determine your eligibility for critical disease coverage. The results of these tests may also impact the premium rates for your policy. However, some providers offer term insurance without medical tests, especially for younger applicants.

Difference Between Critical Illness in Term Insurance and Health Insurance

When navigating the realm of insurance options, you may come across various plans, including pure health insurance and serious illness term insurance. While these plans may seem similar at first glance, they serve distinct purposes and offer different types of coverage. 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 disease

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 serious 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, it has an easier claim process with clear criteria for covered illnesses

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

Focus

Financial protection in case of a severe illness

Managing ongoing healthcare costs

What Illnesses are Included Under Critical Illness Plans?

Critical illness insurance is designed to provide financial support when you face severe health challenges. These policies mainly cover a range of medical conditions that can be life-threatening or significantly impact your health and daily life. While the exact list of covered illnesses can vary between insurers and policies, here are some commonly included conditions:

  • Major Cancers: Different stages of cancer are often covered, with some plans specifying the severity.
  • Heart Diseases (Acute Coronary Syndrome): This can include heart attack, coronary artery bypass surgery, and valve replacement surgery.
  • Stroke: Some policies also cover stroke cases where the blood supply to the brain is interrupted, leading to long-term damage.
  • Organ Failure: This can include kidney failure requiring dialysis, liver failure, and lung failure.
  • Major Organ Transplants: Covers the need for major organ replacements such as liver, kidney, or heart. The coverage can 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 disease policies may cover certain severe musculoskeletal conditions like permanent paralysis of limbs.

While critical disease plans typically offer coverage for several severe medical conditions, the exact list of illnesses covered can differ from one provider to another. Reading the policy document carefully is crucial to ensure you have a clear understanding of your policy’s terms and avoid any unpleasant surprises in the future.

What are the Illnesses Excluded Under Critical Illness Plans?

Critical illness insurance plans are designed to provide comprehensive financial protection against various medical conditions. However, it is essential to know that certain illnesses may not be covered under a critical disease insurance plan. Insurers usually have a list of exclusions that you should know before buying a policy. Here is what is commonly excluded:

  • Diseases Leading to Death During the Survival Period: Any diseases causing the demise of the insured during the specified survival period assessed from the onset of the condition.
  • Unnecessary or Unapproved Medical Treatments: Any medical operation or treatment that is not medically necessary or is not administered by a medical practitioner.
  • Congenital Conditions: Any congenital diseases or conditions present from birth typically are not covered.
  • Birth Control or Hormone Treatments: Any covered critical illness resulting from birth control treatments and hormone replacement therapy, as well as any sequelae.
  • Gender Transition or Cosmetic Surgeries: Treatment/surgery for gender transition or aesthetic surgery, as well as any complications/illness resulting from such treatment/surgery, are excluded.
  • Self-medication or Family-treated Illnesses: Other covered critical diseases resulting from treatment by a family member, self-medication, or any treatment that is not scientifically recognized.
  • Alternative Medicines: Any covered critical health issue 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.
  • Self-Inflicted Injuries or Suicide Attempts: Any illnesses or injuries caused by intentionally harming oneself are not covered.
  • Sexually Transmitted Diseases and Related Conditions: Sexually transmitted diseases, mental or nervous disorders, Acquired Immune Deficiency Syndrome (AIDS), and HIV infection are excluded.
  • Disability Insurance Overlap: If the cause of the critical disease overlaps with conditions already covered under disability insurance, it may not be eligible for additional coverage under the critical illness plan.

These exclusions help insurers maintain clarity about what the policy does and does not cover. Therefore, always review the terms and conditions of your policy to understand the specifics.

Who Must Avail Critical Illness Cover?

Critical insurance coverage is a vital form of insurance that offers financial protection in the event of a severe illness diagnosis. While it is not obligatory for everyone, there are specific groups of individuals who could significantly benefit from having this coverage. Here is a breakdown of the people who should seriously consider it:

Solo Earner

If you are the sole breadwinner of your family and your income is crucial for supporting your loved ones, serious illness coverage is crucial. If you fall ill and become unable to work, the financial strain on your family can be substantial. A critical illness cover provides a lump sum payout upon the diagnosis of a covered illness, helping you cover medical expenses, household bills, and other financial obligations during the period of your illness and recovery.

Individuals with a Family History of Critical Illness

If your family has a history of critical diseases such as heart disease, cancer, diabetes, or stroke, you are at a higher risk of developing similar conditions. Critical disease coverage becomes even more important in such cases, as it can provide the necessary financial help for treatment and recovery. Planning ahead can ease the burden if you or your loved ones are diagnosed with any of these illnesses.

Individuals with Stressful Jobs

Jobs that are demanding and stressful can take a toll on your physical and mental health. High-stress levels are known to contribute to critical conditions like heart attacks, stroke, and even cancer. If your job involves long hours, tight deadlines, or constant pressure, having critical illness insurance can protect you from financial strain in case you fall ill due to work stress.

Individuals Above 40 Years of Age

As you age, the likelihood of developing serious health conditions tends to rise. Serious diseases such as cancer, heart disease, and stroke become more prevalent with age. Therefore, getting critical insurance coverage in your 30s or early 40s can be a smart move, as it is easier to get coverage, and the premiums are more affordable. By planning early, you ensure that you are financially covered when your health needs more attention in later years.

How Does Term Insurance With Critical Riders Work?

Term insurance with critical illness riders is a combination of regular life cover and an additional benefit that offers financial support in case you are diagnosed with a serious illness, like cancer, heart attack, or stroke. It is a smart way to ensure you are covered for life’s unexpected challenges. Let us further understand how term insurance with critical riders works with an example where:

  • Person A has a regular term insurance policy
  • Person B has a term insurance policy with a critical illness rider

Now let us see how the policies work for each person:

Scenario

Person A (Term Insurance)

Person B (Term Insurance + Critical Illness Rider)

Premium Paid

Pays a fixed premium for life cover

Pays a slightly higher premium for both life cover and critical disease rider

Coverage Type

Provides a lump sum amount to the beneficiary after death

Provides a lump sum amount for death and also pays if diagnosed with a serious illness

Claim Payout

Payout is made only after the death of the insured person

Payout is made if diagnosed with a critical illness and upon death

When Critical Illness Happens

No coverage for critical diseases like cancer, heart attack, etc.

Pays a lump sum amount if diagnosed with any covered serious illness, such as cancer, stroke, etc.

Example

Person A passes away due to an accident, and their family gets the payout

Person B is diagnosed with cancer. They receive a lump sum payout from the critical illness rider to help cover treatment costs, in addition to the death benefit if they pass away later.

Purpose of Coverage

Only provides financial security for the family after death

Offers financial support for both serious illnesses and death, giving the insured person peace of mind during tough health challenges


The key difference between the two is that person A only gets life insurance coverage, which helps their family financially if they pass away. Meanwhile, person B gets critical illness coverage, which helps them financially if they are diagnosed with a serious illness. They also get the regular life insurance payout if they pass away.

So, the main benefit of adding a critical illness rider to a term insurance policy is that it provides financial support in case you face a serious health issue while also covering you for life.

How to File a Claim for a Critical Illness Insurance Policy?

Filing a claim for your critical disease insurance may seem overwhelming initially, but it is a straightforward process. Here is what you need to do:

Fill Out the Claim Form

The first step is to fill out the claim form provided by your insurance company. This form will ask for your basic details like your personal information, policy number, and diagnosis.

Provide Your ID and Bank Details

Submit a photocopy of your government-issued photo ID (like an Aadhaar card or passport). You will also need to provide your bank details, such as your NEFT information or a copy of a voided cheque, for the payout.

Submit Medical Documents

You will need to gather and submit all the necessary medical documents. These include:

  • Hospital admission and discharge papers
  • Consultation records from your doctor
  • Diagnostic test reports (like blood tests, X-rays, etc.)
  • Medical records that support your diagnosis

Wait for Insurance Confirmation

Once your claim is submitted, the insurance company will verify the details and confirm the diagnosis. After this, they will process your claim and release the payout based on the terms of your policy.

By following these steps, you will be able to easily file a claim and receive the financial support you need during a difficult time.

Documents Required at the Time of Claim

When filing a claim with your insurance provider, ensuring you have all the necessary documentation in order is crucial for a smooth and timely process. Whether you are making a claim for life insurance, health insurance, or any other type of insurance policy, certain documents are generally required to support your claim and facilitate the claim process effectively.

Claim Form

In the event of a critical illness diagnosis or any other claimable event, you or your beneficiaries will need to complete and submit a claim form to the insurance company. This form serves as an official request for benefits and typically includes details about the illness diagnosis, treatment received, and any other relevant information pertaining to the claim.

Medical Certificate

A medical certificate issued by a registered medical practitioner confirming the serious illness diagnosis is usually a mandatory requirement as part of the claim documentation. This certificate provides official verification of the illness and is crucial for the insurance company to assess the validity of your claim.

Certificate of Medical Practitioner

Some insurance companies may request a certificate directly from the treating medical practitioner providing detailed information about your serious illness diagnosis and treatment. This certificate offers additional documentation and insight into your medical history and treatment plan, further supporting the claim.

Test Reports

Copies of relevant medical test reports confirming the critical illness diagnosis may also be required to support the claim. These test reports provide objective evidence of your illness and help validate the diagnosis, contributing to the thorough assessment of the claim by the insurance company.

KYC Documents

Submit Know Your Customer (KYC) documents, such as identity proof and address proof, to verify your identity and facilitate claim processing. These documents help ensure that the claim is processed accurately and efficiently, reducing the risk of identity fraud or processing errors.

Any Specific Documents

Depending on the insurance company’s specific requirements and the nature of the claim, additional specific documents may be requested. It is essential to carefully review the claim instructions provided by the insurance company and submit any additional documents or information as requested to expedite the claim settlement process.

Others

Any other documentation or information requested by the insurance company to support the claim should be provided promptly. This may include invoices, receipts, or any other relevant documentation related to the claim event. Providing comprehensive and accurate documentation helps facilitate a faster and smoother claim settlement process, ensuring that you receive the benefits you’re entitled to under your insurance policy.

Eligibility Criteria to Avail Critical Illness Insurance

It is crucial for you to understand the eligibility criteria if you are considering the purchase of critical disease insurance. These criteria serve as guidelines to determine who qualifies for coverage and help you assess whether you meet the necessary requirements. Below are some common eligibility criteria to consider:

Age Requirement

Most insurance providers specify a minimum and maximum age for applicants to avail of critical disease insurance. The minimum age requirement typically ranges from 18 to 65 years old, while the maximum age varies depending on the insurer but is often around 75 years old. Age restrictions help insurers manage risk and ensure that you are within an age range where you are more likely to benefit from the coverage.

Health Status

You may be required to undergo a medical underwriting process to assess your current health status. This process may involve completing a detailed health questionnaire, undergoing medical tests, or providing medical records. Insurers use this information to evaluate your risk profile and determine your eligibility for coverage. If you have any pre-existing medical conditions, you may still be eligible for term insurance for critical illness, but your premiums may be higher, or certain conditions may be excluded from coverage.

Lifestyle Factors

Insurance providers may consider certain lifestyle factors when assessing your eligibility for serious illness insurance. Factors such as smoking status, alcohol consumption, and participation in high-risk activities or occupations may impact your eligibility and premium rates. Insurers may view individuals with healthier lifestyles as lower risk and may qualify for more favorable terms.

Coverage Limits

Insurers usually impose coverage limits on critical disease insurance policies, including maximum benefit amounts and minimum waiting periods before benefits are payable. Thus, you should carefully review these limits to ensure that the coverage meets your needs and expectations.

Tax Benefits of a Critical Illness Insurance Cover

Were you aware that when you purchase a critical illness insurance cover, you can enjoy tax benefits under Section 80D of the Income Tax Act 1961? This section allows you to claim deductions for the premiums you pay for your insurance, which helps reduce your taxable income. The given table will help you understand how it works based on the age of the person covered:

Age of the Assessee

Beneficiaries of Critical Illness Cover

Maximum Permissible Tax Deduction

Below 60 years

Self, Spouse, Dependent Children, and Parents

₹25,000 for self, spouse, and dependent children

₹25,000 for parents below 60 years

₹50,000 for parents above 60 years

Above 60 years

Self, Spouse, Dependent Children, and Parents

₹50,000 for self, spouse, and dependent children

₹50,000 for parents above 60 years

Considerations While Buying a Critical Illness Plan

When purchasing a serious illness plan, it is crucial to carefully consider various factors to ensure you obtain the most suitable coverage for your needs. Here is an in-depth exploration of the key considerations:

Coverage Options

Review the list of critical diseases covered by the policy, especially if you seek term insurance for senior citizens. Ensure it includes illnesses relevant to your health risks and family history. Look for term insurance 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 serious 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 disease policies 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 its high claim settlement ratio and hassle-free claim settlements to avoid complications during a critical disease diagnosis.

Insurer’s Reputation

Research the reputation and financial stability of the insurance company offering the critical disease 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 disease coverage has become increasingly vital in today’s world as the prevalence of severe medical conditions continues to rise. Unlike whole life insurance, which primarily focuses on lifelong financial protection for your beneficiaries, critical illness insurance provides immediate financial relief during your lifetime if you are diagnosed with a severe illness. It offers financial support, flexibility, and peace of mind when life throws unexpected health challenges your way.

Whether you are a solo earner, have a family history of illnesses, or simply want extra security, a critical illness policy can make a world of difference. Choose wisely, secure your future, and ensure you have one less thing to worry about when it matters the most!

FAQs on Critical Illness Insurance


1

Can I cancel my critical illness policy if needed?

Yes, most insurers allow policyholders to cancel their critical disease policy, but terms and conditions may apply. It is recommended that you 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 disease policies 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 is 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 plan alongside your existing health insurance to supplement coverage and provide additional financial protection against serious diseases.



4

What are critical illnesses?

Critical illnesses are severe health conditions or diseases that can significantly impact your life and ability to work. Examples include cancer, heart attack, stroke, organ failure, and major surgeries.



5

Is critical illness insurance cover expensive?

The cost of serious illness insurance cover varies depending on factors such as age, health status, coverage amount, and insurer. While premiums may be higher compared to other types of insurance, the financial protection provided in the event of a critical disease diagnosis can outweigh the cost.



6

Why is a critical illness insurance cover essential?

Critical disease insurance cover is essential because it provides financial protection and peace of mind during challenging times. It helps cover medical expenses, household bills, and other financial obligations if you are diagnosed with a covered serious illness and unable to work.



7

Are medical tests important to get critical illness cover?

Yes, medical tests are often required to assess your current health status and determine eligibility for critical insurance cover. These tests help insurers evaluate your risk profile and may influence premium rates and coverage terms.


8

Does critical illness pay monthly?

No, critical illness insurance typically pays out a lump sum amount upon diagnosis of a covered critical disease. This lump sum can be used to cover medical expenses, replace lost income, or fulfill other financial needs during the illness and recovery period.


9

What is the survival period of a critical illness rider?

The survival period of a severe illness rider refers to the length of time the insured must survive after the diagnosis of a covered critical disease to be eligible for the payout. This period varies depending on the policy terms but is usually around 30 days.

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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The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.

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