Critical Illness Rider: Add It To Your Term Insurance

by | Aug 21, 2024

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:

  1. 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.
  2. Financial Security – It provides you cover against various life and lifestyle-threatening illnesses such as stroke, heart attack, kidney failure, open-chest surgery etc.
  3. 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. 
  4. Lump sum Payout – With the diagnosis of any of the listed critical illnesses, you get a huge lump sum payout without any hidden costs.
  5. 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.
  6. 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.  

  1. 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.
  2. 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.
  3. 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. 
  4. 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.
  5. 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

  1. 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.
  2. It pays you a huge lump sum upon diagnosis of a listed critical illness. 
  3. You can utilize this money to pay for your medical treatment or your monthly bills. The choice is yours.
  4. It supplements your income in case you go out of work or lose your income partially due to your long and pervasive illness.
  5. Choose an appropriate critical illness cover amount. You can also link it to your annual income. 
  6. Your critical illness rider cover period and cover amount will depend on your base term insurance policy cover amount and coverage period.
  7. 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.
  8. 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.

Author

  • Shashank Bhardwaj

    Shashank Bhardwaj is Marketing Manager at Algates Insurance. He has been part of company from past 2 years, where he managed to research and develop content in life and health insurance domain.

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Author Profile

Nidhi Verma - Founder & CEO at Algates Insurance
Shashank Bhardwaj is Marketing Manager at Algates Insurance. He has been part of company from past 2 years, where he managed to research and develop content in life and health insurance domain.

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Disclaimer :The information contained in this blog is for information purposes only. It does not constitute insurance advice and we do not guarantee the accuracy, adequacy or the completeness of the information contained here.

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