Critical Illness insurance is a health policy covering specific pre-defined illnesses that are both complicated and expensive to treat. These policies are benefits-based and offer a lump-sum pay-out of the entire sum insured (SI) on the policyholder being diagnosed with a critical disease. After that, the policy ceases to exist and is not renewable. This is unlike a normal health insurance, which reimburses medical costs to the hospital (indemnity-based) and can be utilised any number of times in the policy period, up to the sum insured (SI).
The use of critical illness must be understood in relation to the risks being covered. First, the cost of treatment. Cancer, coronary events, strokes are conditions that involve a high cost of treatment and a regular health insurance may not suffice. Even if they are covered by a large sum insured, the cost of these indications goes beyond just treatment. There is a loss of income, cost of home care in recovery, and recuperation costs. A lumpsum payment from a critical cover, on first diagnosis, not only provides financial assistance for direct medical care but also covers these other aspects, without the hassle of claims or reimbursements.
How the premiums compare
The sums insured in critical illness category are typically in the range of ₹2-10 lakh in Star Health and HDFC Ergo. Aditya Birla and Care Health offer covers extending to ₹1 crore as well. The quantum of savings, existing health cover and other means of income in the family should be considered in choosing the right sum insured. The premiums are also not as high as a regular health insurance cover. Also, the premiums don’t seem to depend on the range of illnesses covered. The premiums for critical illnesses from Care Health start at ₹1,600 for a ₹10-lakh policy covering 32 illnesses. HDFC Ergo’s policy for ₹10 lakh for a 32-year-old costs ₹4,000 per year and covers 15 indications. On the higher end are similar policies from Star Health and Aditya Birla which cover 9 and 50 indications each, and cost ₹17,000 and ₹10,000, respectively for the same SI. While Star offers indemnity-based coverage as well apart from lumpsum cover, Aditya Birla offers wider coverage and comprehensive wellness features too.
What to look for
Among the various conditions, pre-existing diseases (PED) and 90 days initial waiting period are stipulated with Critical Illness insurance too. Critical or not, claims related to PED will not be admissible for four years from the start of coverage. Even if included in the diseases covered list, claims for those may not be admissible in the initial 90 days period as well. Pre-issuance medical exams requirement will be dependent on age and issuer (Star Health may require one, while HDFC doesn’t).
The prospective policyholder with a view to cover specific risks should read the policy document in great detail to confirm the inclusion of those risks and the extent to which those risks are covered. Aditya Birla’s policy for instance covers malignant cancers but not non-malignant, premalignant or carcinoma in situ. Star Health covers Myocardial Infarction (heart attack) but not other acute coronary syndromes. While these wordings may be common across policies, poring over medical nomenclature even with the help of a professional if required, is a necessary exercise considering the precise risks that are intended to be covered by the policyholders. Also, some policies include Alzheimer’s, benign brain tumours in higher offerings but not in base policies.
‘First instance’ – implying only first-time incidence is covered, even beyond PED waiting and ‘specific severity’ – the level of disease complexity required for claim admission, should be checked. Even in pay-out of SI on diagnosis of a covered disease, specifically cancer, conditions may be present. In Aditya Birla’s policy for instance, 50 per cent pay-out of SI is paid for minor stage cancer and 100 per cent pay-out for major stage. But the policy also provides 150 per cent pay-out for advanced stages as well.
Critical illness insurance (complementing basic health insurance) is suitable for policyholders with a family history of illnesses such as cancer, heart attack, kidney failure or any other genetic disease, subject to being covered by the policy. For policyholders in high stress occupations, critical illness insurance can act as low-cost, limited coverage policy for the outlier risks.
