What is a Critical Illness Plan?


When ailments become life threatening, they command specialized medical care. Treatment becomes intensive as well as expensive, sometime beyond the scope of a regular health insurance policy. A regular health plan may be limited, not being able to cover the full cost of treatment. Thus any critical illness could become a strain, both mentally as well as financially. An answer to such concerns is a critical illness health plan.

A critical illness plan is a health insurance policy designed to meet the expenses of life threatening critical ailments. It pays you a guaranteed amount if you are unexpectedly diagnosed with a critical ailment. With a critical insurance plan you get yourself insured against serious illness such as a stroke, cancer, heart attacks, kidney failures or bypass surgery. The list of critical ailments varies from insurer to insurer.


What’s in Store- Key Features of a Critical Insurance Plan?

Get the amount on diagnosis: In a critical illness plan you receive a lump sum amount on diagnosis of the ailment. Unlike a regular health insurance plan, where you would need to submit bills for reimbursement post hospitalisation, in a critical illness plan you receive the benefit amount, on the basis of valid documentation confirming the diagnosis of the critical ailment. The policy would cease to exist once the cover amount is paid out.

Fixed benefits: Critical illness covers are fixed benefit plans. The sum insured is fixed at policy inception and would be paid out entirely irrespective of whether you are hospitalised or not and, what your actual expenses are.
Wider coverage: A regular health insurance plan may normally not cover certain ailments, such as organ donation and transplant surgeries. A critical insurance plan has a much wider scope. The most commonly covered conditions include:

The tax angle: The lump sum amount paid out in a critical illness plan is free from tax. What’s more, the premium that you would pay offers income-tax benefits under Section 80D.

How Can a Critical Illness Plan Help Me?


As the very name suggests a critical illness plan aims to meet the high expenses incurred in treating serious and critical ailments. Paid as a lump sum benefit, the plan gives you liquidity during much needed times. A critical illness plan helps you to:

  • Meet treatment expenses related to critical ailments and, for recuperative aids.
  • Get a lump sum benefit on diagnosis of the ailment, without the need to be hospitalised.
  • The lump sum amount could be used to meet loss of income, or pay off debts, in case the ailment renders you total or partially disabled.Serious ailments with long term hospitalisation leads to decreased ability to earn, the amount could be used to pay off debts.
  • Gives your family peace of mind when fighting the illness. It provides the much needed financial support during trying times, without you having to run around for money.
  • The fund could suitably be used to better lifestyle and lead healthier years ahead.

The Options- Rider or as Standalone

Critical illness benefits are available as a rider with a regular health plan or as a standalone policy. Though the very nature of the two remains similar, their scope and extent of coverage significantly differ.

Number of ailments covered: In a critical illness rider, the number of ailments covered is generally restricted to around 5 or 6. A standalone critical illness policy is far more comprehensive, sometimes covering even 20 illnesses.

Premium and amount of cover: The amount of cover too is restricted, as IRDA guidelines state that the premiums on a rider should not exceed 30% of the base policy premiums.  Riders of course work out as a more convenient option as premiums are clubbed along with the base policy. On the cost front, a rider works out far more expensive as they are an add-on with a regular plan. So if you are looking for a larger cover with a wider range of illnesses, a standalone policy should be ideal.

Getting the cover- How Does it Work?

The plan covers a list of pre-determined illnesses. The number of ailments covered though differs from insurer to insurer.

When you buy yourself a critical illness plan, you are guaranteed a defined amount on diagnosis of a critical ailment. Your insurer would pay this lump sum benefit irrespective of what your actual expenses are, on diagnosis. Hospitalisation isn’t a requirement. You would however have to submit all documents confirming diagnosis with your consultant’s certification. The benefit paid out serves perfect to meet treatment costs or as an income supplement in case of loss of income due to the illness.

Who and when can one opt for a Critical Illness Plan?

The entry age of a critical illness policy is generally between 18 to 60 years of age. The policy is however renewable for life, if the cover is maintained without a break with the same insurer. For children between the ages of 5 years to 18 years, cover is possible when parents are also insured under the same policy.

It is always wise to opt for the plan at an early stage in life. The earlier the policy is taken; the premiums work out to be much lesser. For those with a family history of critical illness, such as heart ailments, kidney failures etc… it makes more sense to get a cover at an early stage in life.


How Much Cover Should I Opt For?

As important as purchasing a critical insurance cover, it is equally important to purchase the right size of cover. Where a small cover may render your policy ineffective to meet the costs, a policy with a high coverage may cost you more. Thus choose a plan that gives you enough coverage. Here is what you need to bear in mind while making the choice.

  • Age: is a very important decisive factor in getting to the right amount of cover. The higher your age; keep your sum insured higher. This is because as you age, the chances of developing a chronic ailment is much higher.
  • Medical history: How has your medical history been? Do you have a family history of any major ailments, such as heart or kidney? If you do, then the chances are higher of you contracting the ailment. Thus ensure your policy cover amount would be able to fulfil the expenses the treatment demands.

Claims and More

wMaking a critical illness claim is easy and hassle free. The plan does not involve any reimbursements of actual expenses. The benefit is paid out as a lump sum amount on diagnosis.

All that needs to be done is to submit the claim form along with all supporting reports to prove diagnosis. The insurer would assess the document in accordance with the plan terms and conditions, to check if the claim is admissible as per the policy. The benefit amount would then be paid out to you to meet the expenses incurred.

Exclusions and the Fine Print

What’s not covered?  Policy exclusions vary from plan to plan. It is thus of utmost importance to read the fine print of the policy document at the time of purchase itself.

The survival clause: Critical illness claims stress on a survival clause. The policy would not pay any benefits in case the insured dies within a stipulated timeframe of diagnosis of the ailment, which is generally around 30 days. So for the benefit to be payable the insured must survive this stipulated period.

The waiting period clause: There would be a waiting period for making a claim under the plan. This waiting period, generally around 90 days, during which time, claims would not be entertained.

Pre-existing conditions: Pre-existing conditions are those conditions that exist before the inception of the policy. Such pre-existing conditions or congenital conditions would not be covered by the plans. So typically any critical illness which was first manifested or contracted at the time or before purchasing the insurance policy or, if care, treatment, or advice was recommended earlier, they would not be covered

Other exclusions

  • Presence of HIV/AIDS infection
  • Treatment arising from or traceable before to pregnancy or childbirth, including caesarean section and birth defects
  • War, invasion, act of foreign enemy, terrorism, hostilities (whether war be declared or not), civil war, rebellion, revolution
  • Naval or military operations of the armed forces or air force and participation in operations requiring the use of arms or which are ordered by military authorities for combating terrorists, rebels and the like, any natural peril
  • Consequential losses of any kind, be they by way of loss of profit, loss of opportunity, loss of gain, business interruption etc.

A critical illness plan is not a substitute for a regular health plan

A critical illness plan and a regular health insurance plan are both poles part. Hence it isn’t advisable to substitute it for a regular plan. Where health insurance foots your medical bill, with a critical illness plan you are financially prepared to meet major illnesses. For a wide comprehensive health protection a combination of a regular health plan with a critical illness benefit would work well.

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