Do You Really Need Critical Illness Insurance? 5 Key Questions Answered
Critical illness insurance, also known as critical illness cover, is a type of health insurance plan.
Falling critically ill can turn your world upside down. Not only are you dealing with a serious health condition, but the medical bills can also burn a deep hole in your savings. This is where critical illness insurance can come to your rescue. But do you really need critical illness cover? Let’s find out.
What is Critical Illness Insurance?
Critical illness insurance, also known as critical illness cover, is a type of health insurance plan. It pays you a lump sum amount if you are diagnosed with a specified critical illness during the policy term. This payout can be used to cover your medical bills and other expenses. In India, the most common critical illnesses covered are:
- Heart attack
- Major organ transplant
- End-stage liver disease
- Kidney failure
The policy term is usually long – typically 20 or 30 years. The payout you receive is tax-free under section 10(10D) of the Income Tax Act.
Now, let’s look at some key questions to determine if critical illness insurance India makes sense for you.
1. Do You Have Sufficient Health Insurance?
Before considering critical illness cover, examine if your existing health plan adequately covers hospitalisation. Take a close look at what all your present health plan covers during hospitalisation.
- Does it sufficiently cover room rent and ICU charges? Often, insurers cap room rents at 1% of the sum insured per day. This may prove inadequate during treatment at costly private hospitals.
- What about ambulance fees to transfer you from one hospital to another specialised facility? Many basic plans put a cap of just ₹2,000, which may not suffice.
- Examine if pre-hospital and post-hospital treatments for specified days are covered before and after admission. This includes diagnostics and doctor fees.
- Also, assess sub-limits on expenses like pharmacy bills, surgeon fees, OT charges and so on. Lower sub-limits can leave you paying hefty bills from your own pocket.
If your health insurer provides only basic coverage, then opting for adequate critical illness cover makes sense. This will supplement your health policy during major illnesses.
2. How Much Coverage Do You Need?
Critical illness policies in India offer sums insured ranging from ₹1 lakh to ₹2 crores. Your ideal coverage amount depends on:
- Your current income and savings
- Your medical history
- Treatment costs of illnesses in your city
- Your financial obligations
Ideally, your critical illness cover should be enough to cover your loss of income during treatment and recovery.
3. How Much Premium Can You Afford?
The premium depends on the insurer, your age, sum insured, smoking status, location and pre-existing ailments. For instance, at age 30, ₹50 lakh critical illness cover may cost around ₹650 per month. This can go up to ₹5,000 per month for someone aged 50.
So factor in the premium you can set aside per month or year for adequate critical illness insurance. Then, choose an optimal sum insured your budget allows.
4. What Does Your Employer Cover?
Some progressive Indian employers provide group critical illness insurance. So first, examine what conditions and sums insured are covered by your company policy.
If your employer covers heart attacks and cancer up to ₹10 lakhs, you may opt to enhance protection with ₹40 lakh additional critical illness insurance. This will shield you financially in case of expensive treatments.
5. Does It Suit Your Stage of Life?
Ideally, opt for critical illness insurance by age 30 or at least 10 years before common critical conditions manifest in your family.
Your risk also increases after age 50. So it’s prudent to purchase adequate critical illness cover right when you start earning. This locks in your premium at a lower rate for your entire policy term.
The Bottom Line
While the possibility of falling critically ill cannot be accurately predicted, you can cushion yourself financially with adequate critical illness insurance. Evaluate the above parameters, choose an optimal cover amount and enhance your health policy. Then, you can rest assured that medical emergencies will not drain your bank balance.
Stay healthy! Stay protected!
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