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Critical Illness Policy: All you need to know

With critical illness insurance policies, one can receive a lump sum amount which can be utilised to cover treatment expenses when they are diagnosed with any one of the critical illnesses. 

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A critical illness plan pays a predetermined lump sum amount that policyholders can use to cover their medical and household expenses.

A country’s gross domestic product (GDP) depends upon how healthy the population is. The poor state of the health care system and lack of awareness about health insurance has led to lower penetration of insurance in India. Even now around 70-75 per cent of Indians pay for medical services from their pocket. 

Rakesh Goyal, Director, Probus Insurance Broker says, “In such a situation, one deadly disease can wreck the financial condition of any family. Even having a basic standard health insurance plan would not give enough protection if there were any critical illness disease.”

For instance, cancer is a critical illness that involves considerable costs, way beyond the scope of the sum insured in a typical health insurance plan. A Critical Illness (CI) insurance policy offers insurance coverage that helps policyholders to handle expenses related to life-threatening critical illnesses and lifestyle diseases such as stroke, paralysis, live disorders, and kidney failure, among others.

Therefore, Goyal points out, “a specific insurance policy that deals only with such critical conditions is a necessity, especially in today’s time when quality care has become extremely expensive in India.”

How are CI plans different from normal health insurance plans?

With regular health insurance plans, policyholders receive the reimbursement of the expenses incurred while seeking medical care. However, experts say with critical illness insurance policies, one can receive a lump sum amount which can be utilised to cover treatment expenses when they are diagnosed with any one of the critical illnesses. 

Benefits of CI plans

There are several benefits of a critical illness policy. It covers medical expenses and hospitalization as medical treatment can be very expensive and can become a huge financial burden if someone is diagnosed with a critical illness.

“One may need to take several leaves from work for the treatment. A critical illness plan will cover this loss of income. Also, in case of a critical illness, it’s not just the policyholder but also their family that is financially impacted. A critical illness plan pays a predetermined lump sum amount that policyholders can use to cover their medical and household expenses,” explains Goyal. 

Critical illness insurance comes with tax benefits, as the payout is completely tax-free under Section 80D of the Income Tax Act. However, experts say that there are a few factors that one needs to be kept in mind while buying the policy. 

Factors to keep in mind while buying the policy

Medical expenses are usually extremely high for treating a critical illness. So, industry experts say it’s important that treatment expenses are covered, as this is the foremost purpose of a critical illness insurance policy. 

You can find out about the expenses involved from a trusted medical professional or a person who has knowledge of this. 

Goyal explains, “When deciding on the cover, remember that there may be several other expenses involved apart from the medical bills. This may include various tests, hospitalization and post-treatment care costs.”

Also, note that undergoing treatment may need you to take several leaves from work. Hence, according to Goyal, consider the loss of income and household expenses or liabilities, so that your family doesn’t have a huge financial burden while you’re undergoing treatment.

Who should opt for CI plans?

The critical illness policy or the rider, Goyal says “can be particularly beneficial for individuals who wish to take no chances with certain health conditions, especially if they have a medical history. Also, primary earners of families who can ill-afford a hit on their finances from a critical illness insurance policy” 

Having said that, anyone can buy a critical illness insurance policy as we all face the risk of such illnesses. With medical expenses surging, the cost of treatment of major diseases has become almost exorbitant. 

Goyal points out, “If one is hospitalized for the treatment, the costs could be even higher, especially if one needs to visit a super-speciality hospital. So, opting for a critical illness policy would be a wise choice.”

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