With medical costs rising each year, it is mandatory to have health insurance. Any occurrence of hospitalisation is draining emotionally and financially, but insurance provides a sense of relief.
While in most cases, a regular health insurance is sufficient to protect oneself and family, it may not be enough to make up for the loss of income and liquidation of savings and investments due to the prolonged treatment and hospitalization required in case of a critical illness.
There are health insurance top-ups that can be bought for extra protection. But another effective solution to the problem of dealing with a critical illness is to buy a critical illness cover. The objective of this insurance is to provide a lump sum to the insured upon diagnosis of a critical illness listed in the cover.
Critical illness insurance supplements the loss of income due to hospitalization for longer periods. The policy involves a one-time pay-out of the sum assured after which the policy lapses.
Here are a few tips to take note of while purchasing a critical illness cover:
1. Estimate the cover you need
Before you go shopping for a critical illness plan, chalk out an estimate of the amount you would be needing to be covered. You must consider your regular expenses such as payment for mortgage or EMI and rental payments and non-discretionary expenses that need to be taken care of in case of loss of income during hospitalization to understand how much you will need when you claim for it. However, buy a policy that fits your budget as you don’t want to strain your finances to buy a policy whose premium is too steep.
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2. Look for the diseases that are covered
Different insurance companies cover different diseases and while some disburse the sum assured based on the seriousness of the disease, others pay irrespective of the seriousness of the illness. While cancer, heart attack, coronary diseases, strokes etc. are the major illnesses covered in a critical illness cover, you must look for diseases that you think you could be particularly susceptible to. Go through the policy documents to get a comprehensive list of illnesses covered under the plan.
3. Check for the associated waiting and survival period
Most critical insurance plans come with a waiting and survival period associated with them. The waiting period is the time gap between buying an insurance policy and the disease getting diagnosed. Survival period is the number of days one survives after diagnosis of a critical illness. Before laying your hands on a critical illness plan, check if there is any waiting or survival period involved and how long are these periods. If an individual is diagnosed with a critical illness against which the claim is made before completion of the waiting period, he would not be eligible to claim the sum assured from the insurer. On the other hand, if he passes away before the survival period is over, no benefits are given to the family members.
4. Critical illness plan is different from health insurance policy
Critical illness insurance is not synonymous to health insurance plan, as it pays a lump sum at the time of the diagnosis irrespective of the cost of hospitalization or the medical expenses incurred. The purpose of such a policy is to compensate for loss of income so that the necessary expenses are met without the family having to go through hardship. The right thing to do is to buy a critical illness cover along with adequate health insurance. There are health insurance policies that come with a critical illness rider or add-on. If your health cover doesn’t have any such add-on, go for a separate critical illness cover.
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5. Check the settlement process
The settlement process is crucial as it involves payment of a huge amount and while some provide a complete cashless facility, some do not. Some insist on submitting all documents by the insured person after the event is over. Also keep in mind the hospitals that are covered in the plan, as some do not offer coverage for all hospitals. Additionally, find out the settlement history of the company.
(The writer is the CEO of BankBazaar)