Critical Illness Insurance: Why it’s critical

Critical illness can strike anyone at anytime. A little bit of preparation and planning today gives peace of mind and a secure future

ExercisingWhen the unsuspecting Sanjiv Kumar was diagnosed with lung cancer at 34, his world came crashing down. He wasn't prepared to face either the emotional challenges or the financial burden that came with his new condition. Luckily for Sanjiv, his cancer was detected in the early stages and chances of his recovery were high. But round-the-clock medical treatment and care for months together, added to his high medical bills. His cancer put him out of his job. And to ensure he was attended to all the time, Shalini, his wife, also had to leave her job.

Suddenly, the young earning couple were faced with zero-income, rising expenses and the question of survival. Not only were his medical expenses rising, but other expenses such as repayment of the home and car loans, electricity bill, grocery bill, their children's school fees, and many such expenses remained unmet.

The case of Sanjiv and Shalini is not an isolated one. Critical illness can strike anyone, and at anytime. One look at the statistics proves that there is a high probability that a critical illness may strike us or one of our loved ones in our lifetime.

Indians at higher risk

Worldwide, the incidence of critical illnesses such as diabetes, heart attack, cancer, hypertension, and renal failure is on the rise. But, these figures are even more disheartening for Indians. For instance, according to the Cancer Aid and Research Foundation, an Indian charitable organisation, it is estimated that approximately one million new cancer cases will be recorded every year and at any given time there will be three million cancer patients in India. Other statistics suggest that one in every 12 Indians is expected to get some form of cancer before they reach the age of 64. Recent studies suggest that one in three urban Indians have high blood pressure.

Readers of Complete Wellbeing may recall our coverage of diabetes in our October 2007 issue, where we highlighted the dangerous proportions to which diabetes is showing up in the blood streams of Indians. Our country is already the diabetes capital of the world with 40.9 million diabetics. According to Indian Council of Medical Research [ICMR], India will also be the world capital of heart attack and hypertension by 2020.

The good, the bad and the ugly

The good news is that, thanks to advances in medical science and improved lifestyles, survival rates of critical illnesses are going up. But the bad news is that a critical illness treatment costs are prohibitive to all but the wealthiest among us. Everything is expensive - tests, curative treatments, surgeries and medicines. The ugly aspect of contracting a critical illness is that it throws life completely out of gear as the sufferer often remains incapable of earning a living, temporarily, if not permanently. What is worse is that the critical illness patients become more dependent on their loved ones, to not only take care of them but also to financially provide for them.

It is better to be safe than sorry

The tragic story of Sanjiv and Shalini brings out the reality, which none of us want to face. We neither want to think of the possibility of a critical illness striking us nor want to prepare towards securing our future in case it does.

But not thinking about it doesn't make it disappear. Have you ever considered what would happen if one day you found yourself lying in the hospital because of a mild heart attack? Or you're diagnosed with cancer or any other critical illnesses? This will result in a radical change in your lifestyle maybe moving to a less stressful and maybe a less lucrative job - in addition to the financial and emotional impact on your family.

How can I prevent this, I hear you ask?

Incorporating a few lifestyle changes

By leading a healthy lifestyle, you automatically reduce your risks of suffering from a lifestyle-related illness such as hypertension, diabetes and even cancer. For many, this simple rule is one of the most difficult one to follow. In order to keep diseases at bay, you must take your lifestyle seriously and follow some very simple rules:

  1. Eat well, eat right
  2. Sleep enough
  3. Exercise regularly
  4. Try and avoid stress
  5. Dedicate time for activities you enjoy.

Additionally, you must try and avoid

  1. food and substances that are known to be harmful
  2. smoking and drinking alcohol
  3. overindulgence in sweets and fatty foods
  4. overexposure to pollution
  5. overexposure to harmful radiation.

Dealing with financial burden

Prevention is better than cure, not just in case of physical health, but also in case of your financial health. Being prepared for any sudden financial requirement ensures that you will not have to scout for funds, during any emergency - medical or non-medical.

Many of us hardly spend time planning for the rainy day. According to a senior insurance advisor, most people spend less than five minutes per year evaluating what would happen to them financially if they were to experience a critical illness in the family. Yet, when you think about the high probability of contracting a critical illness, doesn't it make sense to insure ourselves and our loved ones against the financial consequences of critical illness?

Critical illness insurance

We must thank South African cardiac surgeon Marius Barnard who invented critical illness insurance. After observing the financial hardship of patients suffering from critical illnesses, Barnard was motivated to convince the South African insurance companies to introduce a new type of insurance that covers critical illnesses. Barnard argued that as a medical doctor he can repair a man physically, but only insurers can repair a patient's finances.

Critical illness insurance is designed to provide financial assistance in the form of a lump sum, tax-free payout to help you cope with the financial stress and difficulties associated with diagnosis of a serious illness. Critical illness insurance plans supplements mediclaim, which reimburses the hospitalisation and medical expenses.

Critical illness insurance plans are benefit plans that pay the amount equal to sum assured, if the critical illness strikes, irrespective of expenses incurred on treatment. Most insurance companies provide critical illness covers as a value addition to their existing plans, keeping in mind the growing need for health insurance. Policyholders need to pay a nominal amount of additional premium to avail these covers for critical illness.

Critical illness insurance pays you for living

In typical critical illness insurance plans, a lump sum allowance is paid irrespective of the actual medical expenses. Most critical illness plans cover cancer, heart attack, diabetes, multiple sclerosis, kidney failure, and stroke. Money received from critical illness insurance can be used for all the non-medical expenses that are not covered by the health insurance plan.

While planning a purchase of critical illness insurance cover, you should try to estimate what your loss of income will be and how much money you may need to compensate for the earning power that the illness deprives you of. You can consult your financial advisor or insurance broker who deals regularly in critical illness policies on the policies available and the one which is appropriate for you. You can also decide on your requirements by researching on the internet for details of the appropriate critical illness insurance policy that may suit you.

Critical Illness Cover

By VIJAY Kumar Sharma

Life, which begins at birth, is carried forward through education, marriage and eventually after a lifetime of working, we look forward to retirement and some blissful years till it is time for the heavenly abode. If life were so simple, it would be heaven on earth. However, life doesn't always progress in the way we expect. We never know what will befall us at any stage of life.

All of us keep aside some money as "savings" to meet unexpected expenses. We try to eat well so that we remain healthy. We insure ourselves, so that in case of our untimely demise, the family is financially provided for. But what happens if, during our lifetime, we fall critically ill and require immediate medical assistance? Are our finances enough to take care of it? Can we insure ourselves against critical illness also?

Yes. There is the mediclaim benefit provided by the office. But is mediclaim alone enough? Mediclaim will reimburse hospital expenses alone. However, there are other expenses also such as the post-operative care. What can be done in such circumstances? Will our finances be enough? There is no reason for worry as we can insure ourselves against critical illnesses also today.

Is critical illness cover essential? Yes, it is. The change in our lifestyles - long hours of working, higher levels of stress, coupled with little or no exercise and eating junk food - have made us more vulnerable to diseases. Moreover, diseases once considered to be rare are now common - obesity, stroke, heart diseases. Studies show that today, 18 per cent of the urban population suffers from hypertension, which can lead to kidney/renal failure, stroke and a host of other serious diseases. More shocking is that 30 per cent of the population suffers cardiac arrest attack before the age of 40. Should we not, therefore, insure ourselves against health hazards?

But what is critical illness cover? Critical illness cover means cover which pays out on diagnosis of a listed critical illness. The list of illnesses includes cancer, heart attack and stroke.

Indirect costs such as travel, boarding and temporary loss of income due to leave from work or business add to financial burden during a disease. When illness strikes without warning, it can cause a severe dent in our finances. The biggest advantage, therefore, of a critical insurance cover is easy availability of money to take care of the medical expenses; all related expenses for treatment are also covered.

Critical illness cover is available both under individual life insurance plans as well as group insurance plans. The premium for this qualifies for tax deduction under section 80 D of the IT Act.

The global insurance industry list has 37 critical illnesses which include common diseases such as heart attack, strokes, kidney failure and the relatively less common ones such as Alzheimer's disease, motor neuron disease, encephalitis, bacterial meningitis, Apallic Syndrome and so on.

In India, critical illness cover is given for the following critical illnesses:

  • Heart attack [Myocardial infarction]
  • Stroke [Cerebrovascular accident]
  • Cancer
  • Kidney failure
  • Major organ transplant
  • Paralysis
  • Third-degree burns
  • Blindness
  • Coronary artery bypass surgery
  • Heart-valve replacement or repair
  • Aorta graft surgery
  • Primary pulmonary arterial hypertension
  • Multiple sclerosis.

[This is a general list. The illnesses covered differs from insurer to insurer. Before taking critical illness cover, however, the definition, exclusions, conditions, restrictions and requirements should be fully understood].

The benefit amount is usually paid within 30 days after the diagnosis of the disease and the requirements called for by the insurer are met. Expenses like donor's expenses, which are not usually covered under any medical insurance policy, can be paid through this benefit amount.

Some insurers provide premium waiver benefit along with critical illness cover. If availed, the premium due on or after the date of diagnosis of the illness is waived till the maturity date of the main plan or early death of the life assured.

First, let us understand when critical illness claim becomes payable. A pain in the chest followed by hospitalisation may not be compensated. However, a heart attack caused by the death of the heart muscle is due to loss of blood supply because of the complete blockage of a coronary artery. This heart attack is critical and claim shall be paid. But, the illness will have to be diagnosed by a registered medical practitioner and supported by medical reports, X-ray and the like. The insurance company will also get it reconfirmed by a registered medical practitioner.

If the illness is diagnosed within 90 days of taking the policy, you may not be eligible for the claim. Also, if the illness is a result of consumption of alcohol or drugs, then the insurance company may refuse the claim. Hence, it is necessary to know exactly what is and is not covered under the claim.

If you have a critical insurance cover and have availed the benefit for one illness, then you can apply for a fresh critical illness cover but you will not get the cover for the illness for which you have already claimed benefit.

Remember that insurance companies refuse payment of the benefit if you suffer from an illness not in its list. Most common exclusions include HIV-infections, AIDS, drug abuse and self-inflicted injury. Obviously, the claim is not allowed for those already afflicted with any of the illnesses mentioned in the insurer's list.

Another point to note is that several companies offer to pay huge sums in the event of diagnosis of a defined critical illness. The sum assured is designed to help the insured to pay off the expenses incurred on account of the treatment received. However, some companies terminate the contract after the payment of the sum.

Hence, before taking a critical illness cover, it is important to:

  • Understand the definitions, conditions, exclusions, restrictions, requirements.
  • Understand the benefits of the said policy.
  • Know if the definitions, conditions and benefits are susceptible to change during the term of the policy.
  • Know if the premiums are likely to be revised or will remain the same.
  • Know if the policy is terminated or continued after the critical illness claim is paid by the insurer.

The main difference between a critical illness benefit and a mediclaim policy is that under the former, the policy holder gets an amount equal to the sum assured irrespective of the medical expenses on diagnosis of the critical illness while under a mediclaim policy, the policy holder receives a reimbursement on producing the bills, which is limited to the extent of amount of medical expenses incurred.

But critical illness cover is not a substitute for medical insurance cover. This can be an add-on cover but not the only cover. If you want just one cover, then it is better to opt for medical insurance. However, if there is a history of critical illness in your family, it is better to include critical illness cover along with your medical insurance.

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Manoj Khatri
Manoj Khatri likes to call himself an eternal soul disguised, among many things, as a writer. He is the author of more than 1000 published articles — on business management, philosophy and everything in between. He is a certified counsellor and has addressed thousands of students and parents on exam-stress in public seminars. He is the author of What a thought!, a critically acclaimed book based on powerful ideas of some of the greatest thought leaders. Manoj is Editor and Publisher of Complete Wellbeing.