Critical Illness Insurance: More than what meets the eye

Confused about how to choose a Critical Illness Insurance Cover? Relax, and read this short but helpful primer

Agitated manThere’s more to an insurance policy than meets the eye. Insurance as a product has always been a “tax saving” or “mandatory” paper/document which we look out for only on maturity or when a claim arises!

Critical Illness Insurance is one product, being in a free market/non-tariff market [not regulated on the price and feature side], that is open to be stacked with innovative features and price as per the Insurance Company’s internal product philosophy. This makes Critical illness policies far more complex to choose than many of the other products available.

It is therefore vital to look beyond the price tag. Don’t be lured by a lower premium and don’t assume that the most expensive policies are the most comprehensive – which is often not the case.

Here are some questions you need to check on before you decide on a plan.

How much cover do I need?

As a bare minimum, ensure the payout covers your mortgage and any large outstanding loans. Some people opt for more cover – an additional lump sum which can be invested to help meet ongoing living expenses.

Which illnesses does it cover?

The variety of insurance plans available in the market has covers ranging from 6-35 illnesses. The higher the number of diseases covered, the better, though it is obvious that the pricing would be accordingly higher.

What is the Survival Period Condition?

A very important point to consider is the “survival period” condition. This requires the insured to survive a specific period [between 0-30 days] after he has been diagnosed for the illness to claim the cover. The lesser the survival period condition, the better. For example, Mr Kumar had a 2-year-old Critical Illness policy with a survival period condition of 30 days. This year he got diagnosed with cancer, and passed away within 10 days of the diagnosis. Mr Kumar’s family will not get any claim on the Critical Illness. Hence, the lesser the survival period condition, the better.

What is the Waiting Period?

Most policies have a “Waiting Period” in the first year of the policy. A claim arising during this waiting period in the first year is not covered. The waiting period varies from 0-180 days in products. Some plans return the premium paid in case of such a claim in the waiting period, some don’t.

Are premiums guaranteed or reviewable?

The premium that you pay in the first year may not be the same every year. There are plans that guarantee “renewal” and “fixed premium” for a particular number of years. Think carefully about your options, particularly if the difference between a guaranteed or reviewable premium is quite small.

Typically most life insurance products run for about 20-30 years, with a premium review after every five years. General Insurance products are reviewed on every renewal, hence are more likely to change. General Insurance companies can also demand a health check to be done before accepting a renewal proposal. Go for a guaranteed renewal and premium policy.

Experts say that the cost of critical illness policies will rise dramatically over the coming years, largely because of a growing number of claims. Medical science is not only getting better at keeping us alive for longer, it is also detecting many diseases at a far earlier stage. This means that many more people will in the long term claim on their critical illness policies because they are diagnosed with these conditions younger.

Till what age would I be covered?

This denotes the maximum age till which the policy can be covered on payment of regular premium. The same ranges from 60-75 years in various plans. This is important as it will help you plan, and know whether your cover would remain, when you are likely to need it the most.

Though such plans are expensive, there are a few plans in the market, which offer return of all premiums paid in case of no claims made during the covered duration.

Once you are clear of the above you are fairly ready to take a decision on making a very wise decision to purchase your first Critical Illness cover.

Insurance Education

A majority of Indian population does not have a clear understanding of basic financial principles, in spite of lot of information being available about financial markets. Though information is available, it’s interpretation/understanding is lacking.

E.g. “Insurance is a subject matter of solicitation”. Every insurance advertisement has this clause,but it is rarely understood. One humourous interpretation: No one should take offence under the barrage of solicitation from numerous insurance companies. Experts say that it means — Insurance is not to be sold, the consumer should ask for it.

IRDA [Insurance Regulatory and Development Authority] has introduced de-tariffing in non-life insurance. So, risk covers and exclusions have got more complex. Understanding the need for insurance and all factors involved is therefore essential.

Team CW

Manoj Khatri
Manoj Khatri considers himself a student and teacher of the wisdom of love. He is also a writer-editor and has written on topics ranging from strategic marketing and business management to art, culture and even philosophy. His more than 1200 published stories—articles, interviews, full-length features—have appeared in some of the leading newspapers and magazines of India. A certified cognitive behavioural therapist, he works as a personal counsellor too. He is the author of What a thought!, a critically acclaimed book based on powerful ideas of some of the greatest thought leaders. Manoj runs Complete Wellbeing and believes that "peace begins with me".


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