INSURANCE: Should you buy a critical illness policy?

Indians are at an increasing risk from life-style related diseases. There are many who are suffering from diseases like cardiovascular illness and cancer, and that too, at a young age.

How can you protect yourself financially against these ailments? The answer is by having a Critical Illness (CI) plan or a rider that comes with your life and health insurance policies. In case you already have a medical insurance policy (either an individual or a family floater policy), then you may consider adding a CI rider in the existing plan or you may buy it separately. Let's understand in detail.

How does CI policy/rider work

The first thing to note is that a CI rider or plan is different than your regular health insurance plan. Under this the health insurance company will pay a lumpsum money, which is your sum insured in case you suffer from any serious illness, say cancer or heart attack. That lumpsum money will take care of the cost of medical expenses and you can even pay off loans, if you have taken due to the medical emergency.

This policy is different from your regular health insurance plan where you get the claim based on your hospital bill and that too subject to the restrictions and conditions of your medical policy. In a CI illness plan, irrespective of your medical expenses, the insurance company will pay you the entire sum insured as per your policy.

What does a CI policy cover

Most of the common ailments like heart attack, cancer, stroke, kidney failure or paralysis etc are covered under any CI rider or policy. Each company has its own separate list of critical illness, which may or may not be similar. Hence, it is better to read the actual list of illnesses covered by a particular company. Always check the list before you plan to buy any policy.

CI policy v/s CI rider

Once you decide to protect yourself against any critical illness, you must choose between the options of a new standalone CI policy or you can also opt for a CI rider that comes with your regular health insurance plan or term plan. A rider will be available for a much-reduced cost and will carry similar benefits like a standalone policy. You need to be aware of the restrictions and flexibility that come with a rider in terms of increasing your sum assured etc. So, if affordability is not a restraint, then you should go for a standalone CI policy.

Importance of a CI rider or a policy

A critical illness can knock on your door without any warning and you could lose all your savings in the treatment. So it is advisable to have a proper plan that provides you a critical illness benefit especially when you are around 40 years or above. Though buying a CI plan is important, it can never replace the need of a regular basic health insurance policy. Hence, a CI policy should be bought once you already have a sufficient health insurance cover for you and your family members.

The writer is chief gardener, Money Plant Consultancy