What is a critical illness cover

Article authored by i-save.com published on FLAME, IIFL

Should you buy critical illness cover in addition to a health insurance policy?

Critical illness cover is an insurance product that pays a benefit on the diagnosis of certain specified critical illnesses.

The diseases covered under such plans vary from one company to another but most plans cover ailments such as heart attacks, cancer, bypass surgery, kidney failure, etc.

These plans are different from your usual health insurance policies:
Health insurance plans will cover your hospitalisation and medical expenses due to any illness or accident. While, standalone critical illness plans or riders cover only the diseases specified as part of the contract.

Both health insurance as well as critical illness plans are bought for a specified sum assured (the maximum benefit payable by an insurer) and are typically sold for the duration of one year and need to be renewed every year.

In case of health insurance, you will be covered for any medical treatment or hospitalisation expenses as long as they are within your sum assured limit and the policy can continue for the remaining part of the year with a reduced cover (sum assured minus expenses claimed).

On the other hand, your critical illness will pay you the entire sum assured once any of the specified diseases are diagnosed. You are then free to utilise this amount according to your financial needs which could be a lot more than those just related to hospitalisation.

The expenses associated with life threatening ailments are not just restricted to hospitalisation. There could be financial needs associated with lifestyle changes required, continued treatment post hospitalisation as well as the reduction in or loss of regular income. Health insurance policies primarily cover medical and hospitalisation expenses only and do not usually cover post hospitalisation expenses beyond a certain number of days. Since the benefit under a critical illness policy is paid out as a lump sum amount, it gives you the flexibility to manage these additional requirements without hampering your savings.

The best combination would be to buy a health insurance policy and top it up with a critical illness plan. This helps you meet your hospitalisation expenses for both critical illnesses or even other diseases/accidents through the health policy and can provide you with a meaningful financial protection you may require in case of a critical illness.

Make sure you take an adequate amount of cover keeping in mind the rising costs of healthcare. The amount of cover should not only be enough to provide reasonable financial help when it is needed most but should also be affordable.

The author Swapan Khanna is the co-founder & director of MAGI Research and Consultants Pvt Ltd. He is also the co-founder of http://www.i-save.com An online portal, i-save provides information to its customers across various financial services & product categories.