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Importance of Critical Illness Cover in Life and Health Insurance

Critical illness can be defined as the life threatening illness or disease or sickness where the chances of recovering are minimal. Some of the most common types of critical illness are Cancer, Coronary Artery Surgery, Heart Attack and Major organ transplant etc. Normally the chance of recovery from critical illnesses is higher if it is discovered and treated in the initial stages. Critical illness is to be treated over a long period of time. For example, cancer treatment involves multiple sittings of chemotherapy and is not a onetime admission in hospital.

Mr. Jones has taken a health insurance policy from a reputed standalone health insurance company to cover the cost of hospitalization in case of any illness or surgery. One day when he was at home he felt a lump kind of thing in his throat. Upon testing it was found that he was diagnosed with throat cancer. He was admitted to a hospital and the treatment for the cancer has begun. His sum insured was exhausted before the completion of his treatment and he was forced to sell his properties to fund his treatment. This made him think the value of critical illness insurance which could have been opted as an add-on with the health insurance or life insurance.

Critical Illness in Life insurance:

Critical illness is offered as an add-on in the life insurance policy on payment of extra premium. The sum assured for critical illness would be above the base sum assured of the life insurance policy. In case of critical illness the sum assured under the policy is given as a lump sum to the policyholder.

  • If a person is diagnosed with critical illness, the critical illness sum assured will be paid to the policyholder and the critical illness add-on expires but the life insurance cover will remain intact.
  • The policyholder can decide in which hospital he/she would like to get treated.
  • In life insurance policy, a total of 34 to 52 critical illnesses are covered. The number varies for each insurance company. Higher the coverage, higher would be the premium to be paid.

Critical Illness in Health insurance:

Critical illness is also offered as an add-on in the Health insurance policies on payment of extra premium. The sum insured selected under this add-on is different from that of the base health insurance sum insured. In case of diagnosis with any of the critical illness mentioned under the policy, the policyholder is entitled for a lump sum benefit.

  • In case of diagnosis with a critical illness under the health insurance policy, the sum assured section under the policy is paid to the policyholder as lump sum and the health insurance sum insured remains intact until utilized for the critical illness treatment.
  • Only one critical illness claim is allowed under the critical illness policy, after which the policy ceases to exist.

Waiting period in Critical Illness:

Every critical illness policy will have a general waiting period of 30 days to 90 days before the benefits can be claimed. This waiting period is compulsory in all the critical illness policies whether in life insurance or health insurance. Policyholder has to be diagnosed with the critical illness after the waiting period to become eligible for the claim amount.

Survival period in Critical Illness:

The Critical Illness policy mentions that a person contracted with a critical illness need to survive for at least 30 days before claiming for the benefits. The survival period exemption is available with few insurance companies and is mostly offered to loan customers. The survival period is calculated from the date of diagnosis of the critical illness. Once the customer satisfies this condition the claim amount is paid in lump sum to the policyholder.

  • The premium for critical illness cover is slightly on the higher side due to the nature of the policy.
  • The payment is made lump sum to the policyholder and the policy ceases after the payment is done.
  • Tax benefit can be claimed for the critical illness policy.

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