Critical Illness Cover in Term Insurance

Why Your Term Plan Needs Critical Illness Cover

If you want to buy a life insurance policy, you must consider going for a term insurance plan. Term plans are designed to ensure that in case of any eventuality, the family of the policyholder gets the sum assured (i.e. the life cover amount) in order to maintain their standard of living. Undoubtedly, it is one of the simplest and the most affordable insurance products.

Under a term plan, you can either pay the premium on a regular basis or make a one-time payment, depending upon the policy type. A lump sum amount of money (death benefit) will be paid to the nominee in the event of your death.  As a policyholder, you will also get a range of add-ons (riders) that you can avail to get enhanced protection.

Some term insurance plans provide cash pay-outs if the policyholder is diagnosed with a major illness like heart attack, cancer, or organ failure, as these term plans come with a critical illness benefit as well.

A critical illness comes unannounced and its treatment expenses can burn a hole in your pocket. Therefore, it’s prudent to purchase a term insurance policy with critical illness benefit to cover your inpatient and outpatient hospitalisation expenses. It will also provide you with a regular cash flow during your recovery period.

Why Should One Buy Critical Illness Cover?

Let’s take an example of cancer (one of the major critical illnesses) and its impact on the finances of the patient:

Herceptin (one of the best drugs for the treatment of breast cancer) costs around Rs. 75,000 to Rs. 1, 00,000 for a single bottle. It is estimated that one will need 6 to 17 bottles for the cancer treatment. Likewise, Avastin is another popular drug used in healing cancer that costs around Rs. 25,000-Rs. 50,000 per cycle. A patient requires approximately 5 to 10 cycles each course.

Automatically, the treatment cost for this disease will sum up to several lakhs of rupees. Due to huge cost associated, most of the cancer patients can’t undergo the treatment owing to the lack of funds.

It is important to be prepared in advance in order to handle such scenarios. Buying a term insurance plan with critical illness benefit will help you bear the incurred expenses associated with the treatment of major illnesses. Additionally, it will offer a tax-free lump sum payment.

Salient Features of a Critical Illness Cover:

  • The critical illness benefit will provide the entire sum assured as a lump sum in case you’re diagnosed with one of the critical illnesses pre-specified in the policy document.
  • You will be provided with fractions of the sum assured at different stages to meet the incurred expenses.
  • The waiting period for most of the critical illnesses is 90 days from the purchasing date of the plan and 30 days after diagnosis of the illness.
  • Critical illness plans generally come with duration of 15-20 years.

Who should opt for critical illness benefit?

  1. If someone has a family history of critical illnesses
  2. Someone with lack of savings or a financial cushion to fall back on
  3. If the group health plan offered by one’s employer doesn’t cover the time taken for the recovery period

What are some of the major inclusions of critical illness benefit?

Some of the major critical illnesses covered in a critical illness benefit are:

  • Cancer
  • Paralysis
  • Heart attack
  • Major organ transplant like pancreas, liver, heart, and lungs
  • Coronary artery bypass graft (CABG)
  • Kidney failure
  • Stroke

Critical Illness Benefit

Critical illness benefit has gained massive popularity owing to the vast number of diseases it covers, here are the 5 reasons you must invest in one

1. Massive Increase in Lifestyle Diseases/ Illnesses

Owing to stress, imbalanced diet and irregular sleeping habits, people are exposed to risk of developing various critical illnesses like stroke, cancer, paralysis, etc. The treatment costs of these illnesses are also heavy on your pocket. Thus, buying a critical illness cover ensures that you have planned your finances, in case a critical illness strikes. 

2. Easy Access to Lump Sum Amount Of Money

A critical illness usually comes without warning. Its treatment can exhaust your savings.  A critical illness cover will offer you a lump sum in case of diagnosis of a critical illness, thereby providing you the much needed financial support.

3. Managing Your Finances

In most of the cases, the recovery period can leave you bed-ridden. As a result, you won’t be able to work; it can adversely affect your finances.  This is where the critical illness cover comes into the picture. The lump sum amount you get ensures that your regular expenses like children’s education fees, utility bills, etc. are easily managed. 

4. Other Expenses

Besides the treatment cost, there are other expenses like regular visits to the hospital, hiring a nurse for private (home) care also cost a huge amount of money. The funds received as a critical illness benefit will help you manage such expenses smoothly. 

5. Lower Premiums

The premiums paid towards critical illness cover are usually lesser than the premiums paid for a regular health insurance plan. While regular health insurance plans offer wide coverage, a critical illness cover only works for critical illnesses as listed in your policy document.

6. Tax Benefits

Generally, critical illness covers come with double tax-benefits:

  1. For the premiums paid towards under Section 80D of the Income Tax Act, 1961.
  2. On the lump sum amount received on the diagnosis of a critical illness.

Wrapping it up

A medical emergency doesn’t come with a -warning. Thus, buying a critical illness plan becomes vital to manage your finances in such cases. It will provide cash pay-outs if you are diagnosed with one of the critical illnesses listed in the policy. Few companies may also waive future premiums in case of permanent disability. This is done to compensate for your loss of regular income.