What is a critical illness rider? Is it good to have a critical illness cover along with term insurance? What does a critical illness rider cover? What should you consider before buying a critical illness rider along with your term insurance cover?
Let’s find out the answers to these questions in detail. Let’s understand the importance of critical illness cover with a real-life scenario for more clarity.
Imagine you’ve purchased a term cover of Rs. 1 Crore. You bought it to protect your family from any financial hiccups that may occur when you’re no more. Obviously, that’s the reason you buy term insurance in the first place. But what would happen if you are diagnosed with cancer and have to undergo many chemotherapy sessions as the line of treatment? That’s a nasty thing to imagine, but the fact is that anyone can face such a situation.
A nasty and prolonged illness like cancer can cause a big emotional, psychological and financial burden on you and your family. And just one medical emergency might wipe out your entire life time savings. Moreover, the treatment might take several months or even years, which could put you off work. How do you deal with this loss of income and recurring medical expenses?
Here’s a way to come out of this situation.
Go for a critical illness rider along with your term insurance cover while you are still healthy.
A Critical Illness Rider adds a layer of financial safety to you and your family. Term insurance covers your family when you are no more, while critical illness cover provides you with income to cover your medical or other expenses while you are dealing with a nasty, critical, or lifestyle threatening illness.
Now that you’ve understood the importance of Critical Illness Riders in term insurance, let’s come to the basics.
What Is Term Insurance?
In short, term insurance is a type of life insurance that covers you for a certain period of time, and if you die during that fixed term period, your life insurance company provides a huge benefit to your family. Simple term insurance is a very basic cover that only provides protection against the risk of untimely death. To enhance the protection, nowadays, term insurance comes with various riders like waiver of premium, terminal illness benefit or critical illness cover.
Why Add Critical Illness Rider?
If you get lucky, you might not cross your path with any critical illness in life. But the chance is quite low these days. According to an article in the Economic Times, there are an estimated 2.4 million deaths in India from cardiovascular conditions every year. Cancer causes approximately 0.56 million deaths each year. The average cost of treatment is Rs. 3.5 lakh and Rs. 10 lakh, respectively for these illnesses.
A critical illness rider is a MUST while buying a term insurance plan, as you never know when a critical illness will affect you in life. A critical illness rider doubles your financial security at the time of a medical emergency.
Is it good to have critical illness cover with term insurance?
Obviously! A critical illness cover works like a safety net and offers benefits like:
- Income Replacement – Critical Illness Cover works like an income replacement tool in case you are diagnosed with any critical illness. The benefit paid supplements your income if you go out of work partially or fully due to illness.
- Financial Security – It provides you cover against various life and lifestyle-threatening illnesses such as stroke, heart attack, kidney failure, open-chest surgery etc.
- Add-On – CI Rider comes as an add-on along with term insurance. You can choose a benefit amount that suits your needs and pocket.
- Lump sum Payout – With the diagnosis of any of the listed critical illnesses, you get a huge lump sum payout without any hidden costs.
- Medical Expenses – You can use the payout without any restrictions. You can use it for your medical expenses or other monthly bills. No questions will be asked by your insurer.
- Tax Benefits – A critical illness cover is essentially a health cover. If you opt for a critical illness cover along with your term insurance policy, you can avail 80D deductions up to Rs. 25,000 in a year.
Which diseases are usually covered under Critical Illness rider?
Generally, the list of illnesses covered under a critical illness rider varies from insurer to insurer. Here is a comparative list of critical illnesses that are covered under the critical illness riders offered by the top 3 private life insurers in India:
Name of Disease | HDFC Life Critical Illness Plus Rider | ICICI Prudential Critical Illness Benefit | MAX Life Critical illness and Disability Rider |
Alzheimer’s Disease | No | Yes | Yes |
Angioplasty | No | Yes | Yes |
Amputation of Feet Due to Complications from Diabetes | No | No | Yes |
Aorta Graft Surgery | No | No | Yes |
Apallic Syndrome | Yes | Yes | Yes |
Bacterial Meningitis | No | No | Yes |
Aplastic Anaemia | No | Yes | Yes |
Benign Brain Tumor | Yes | Yes | Yes |
Brain Aneurysm Surgery or Cerebral Shunt Insertion | No | No | Yes |
Blindness | Yes | Yes | Yes |
Brain Surgery | No | Yes | Yes |
Cancer of specified severity | Yes | Yes | Yes |
Cardiomyopathy | No | Yes | Yes |
Chronic Adrenal Insufficiency (Addison’s Disease) | No | No | Yes |
Chronic Relapsing Pancreatitis | No | No | Yes |
CiS / Early Stage Cancer | No | No | Yes |
Coma of Specified Severity | Yes | Yes | Yes |
Creutzfeldt-jakob disease (CJD) | No | No | Yes |
Crohn’s Disease | No | No | Yes |
Deafness | No | Yes | Yes |
Dissecting Aortic Aneurysm | No | No | Yes |
Eisenmenger’s Syndrome | No | No | Yes |
Elephantiasis | No | No | Yes |
Encephalitis | No | No | Yes |
End stage liver failure (Chronic Liver Disease) Major Organ Benefit | Yes | Yes | Yes |
End stage lung failure (Chronic Lung Disease) | Yes | Yes | Yes |
Fulminant Viral Hepatitis | No | No | Yes |
First Heart Attack – of specified severity | Yes | Yes | Yes |
Hemiplegia | No | No | Yes |
HIV due to Blood Transfusion/Occupationally Acquired HIV | No | No | Yes |
Heart Valve Surgery | Yes | Yes | Yes |
Infective Endocarditis | No | No | Yes |
Kidney Failure Requiring Regular Dialysis | Yes | Yes | Yes |
Loss of Independent Existence | Yes | Yes | Yes |
Loss of limbs | Yes | Yes | Yes |
Loss of One Limb and One Eye | No | No | Yes |
Loss of Speech Others | No | Yes | Yes |
Major Head Trauma | Yes | Yes | Yes |
Major Organ/ Bone Marrow Transplant | Yes | Yes | Yes |
Medullary Cystic Disease | No | Yes | Yes |
Motor Neurone Disease with Permanent Symptoms | No | Yes | Yes |
Multiple Sclerosis with Persisting Symptoms | No | Yes | Yes |
Muscular Dystrophy | No | Yes | Yes |
Myasthenia Gravis | No | No | Yes |
Myelofibrosis | No | No | Yes |
Myocardial Infarction | No | Yes | Yes |
Necrotizing Fasciitis | No | No | Yes |
Open Chest CABG | Yes | Yes | Yes |
Other Serious Coronary Artery Disease | No | No | Yes |
Parkinson’s Disease | No | Yes | Yes |
Permanent Paralysis of Limbs | Yes | Yes | Yes |
Pheochromocytoma | No | No | Yes |
Poliomyelitis | No | Yes | Yes |
Primary (Idiopathic) Pulmonary Hypertension | No | Yes | Yes |
Progressive Supranuclear Palsy | No | No | Yes |
Refractory Heart Failure | No | No | Yes |
Scleroderma | No | No | Yes |
Severe Osteoporosis | No | No | Yes |
Severe Rheumatoid Arthritis | No | No | Yes |
Severe Ulcerative Colitis | No | No | Yes |
Small Bowel Transplant | No | No | Yes |
Stroke resulting in permanent symptoms Brain & Nervous System Benefit | Yes | Yes | Yes |
Surgery of Aorta Heart & Artery Benefit | Yes | Yes | Yes |
Systemic Lupus Eryth with Renal Involvement | No | Yes | Yes |
Terminal Illness | No | No | Yes |
Tuberculosis Meningitis | No | No | Yes |
Third Degree Burns (Major Burns) | Yes | Yes | Yes |
What should you consider before buying a Critical Illness Rider with Term Insurance?
Buying critical illness cover as a rider comes with some limitations. You also need to decide how much CI cover is sufficient for you. Consider these before you add critical illness cover to your term insurance policy so that you get the right cover for yourself.
- CI Coverage Period – You can choose the cover period of your critical illness rider, depending on the term of the base policy. It has to be always less than or equal to your base cover protection period.
- Cover Amount – While there is no rule of thumb here, you can still link it with your annual income. A cover amount equal to five years of annual income should be good. If you have an annual income of Rs. 5 Lakh, go for a critical illness cover of Rs. 20 Lakh. This will help you sustain yourself financially for a few years in case of job loss due to critical illness. The insurer might even restrict you from buying a high critical illness cover, depending upon its underwriting norms and your medical condition.
- CI Rider Cost – While buying a higher cover sounds better, it can get really expensive. A critical illness cover is much more expensive than a regular term insurance cover. Keep the cost in mind while selecting your options.
- No of Illnesses Covered – Common critical illness riders in the market cover around 15 to 20 illnesses. These plans cover life-threatening illnesses like cancer and renal failure. But they do not cover slow-growing and life-altering serious illnesses such as Alzheimer’s or Parkinson’s disease . But some insurers have now launched critical illness products that cover 64 or even up to 99 illnesses. So opt for a plan that provides more comprehensive cover against critical illnesses. But keep in mind that such plans can be expensive.
- Claim Amount and Severity of Disease – Critical illness cover usually provides layered benefits, where the claim amount depends on the severity of the disease. A certain condition might make you eligible for just 25% or 50% of your total CI cover amount. A certain more severe condition of the same illness might pay 100% of the CI cover. This will entirely depend on the diagnosis of the illness, where the severity is mentioned.
Key Takeaways
- A critical illness rider added to your term insurance policy is another layer of safety net, providing cover against critical illnesses. So enhance your simple term insurance cover by adding a critical illness rider to it.
- It pays you a huge lump sum upon diagnosis of a listed critical illness.
- You can utilize this money to pay for your medical treatment or your monthly bills. The choice is yours.
- It supplements your income in case you go out of work or lose your income partially due to your long and pervasive illness.
- Choose an appropriate critical illness cover amount. You can also link it to your annual income.
- Your critical illness rider cover period and cover amount will depend on your base term insurance policy cover amount and coverage period.
- Check out the list of illnesses covered by a rider and choose one that provides better or more comprehensive coverage against a higher number of illnesses.
- A critical illness cover is more expensive than your base term insurance policy. Keep in mind the cost before you opt for a critical illness rider.
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