Don’t Mistake Riders For Complete Critical Illness Insurance

Critical illnesses, which include cancer, are expensive to treat; hence, insurance is crucial. A comprehensive health insurance plan covers against critical illnesses, but add-on protections can also come in handy.

A critical illness rider attached to a term insurance plan usually works as a handy add-on; however, the scope is limited. The payout is usually fixed and capped, and the number of illnesses covered is also restricted to a handful of major conditions. “So it can be seen as a supplementary financial support in case of an emergency, but cannot be mistaken as a full-fledged safety net against the wide spectrum of critical illnesses that occur these days,” says Sarita Joshi, head, health and life insurance, Probus.

Understanding The Real Purpose Of Critical Illness Insurance

Critical illness insurance (CII) is one of the most mis-sold insurance products. The purpose of the CII is usually not properly explained while selling, and is not understood by the customers who buy them. Often it is sold as a bundled product with home loans.

“The purpose of a critical illness cover is to provide a lump sum payment should the insured be affected by a major medical condition that requires lifestyle modifications/changes or increased expenses that come along with such life-changing events. For instance, one may require help or assistance such as 24-hour home nursing,” says Hari Radhakrishnan, expert, Insurance Brokers Association of India (IBAI).

The triggering medical condition can be certain major illnesses like heart attack, cancer, organ failure, etc., of a specified severity. Critical illness insurance is not meant to cover immediate death due to illness or accident, as the policy has a survival period requirement. Hence, it is not a substitute for medical insurance or term insurance, which serve different purposes. CII also should not be bundled with loans as collateral for this reason.

Why Standalone Critical Illness Insurance Offers Better Protection

However, a standalone critical illness health insurance policy differs from regular health insurance in several key ways. It can be considered a detailed and purpose-built one. It usually comes with a wider illness option, offering freedom to choose the higher sum insured based on your needs.

“Additionally, it provides a lump-sum payout upon diagnosis of a covered critical illness, regardless of actual medical expenses; it also covers specific life-threatening illnesses (like cancer, heart attack, stroke) - but not general medical conditions or hospitalizations,” says Joshi.

A health insurance plan will take care of hospital bills, and a rider on your term plan would give some lump-sum relief. “However, for long-term protection, a dedicated critical illness cover can add an extra layer of protection by providing an extra cushion if your income takes a hit due to the stretching of treatment over months. 

Layering with a separate cover ensures that you need not compromise on your family's financial stability or quality medical care, and it's not just immediate medical expense management,” says Radhakrishnan.