What are the benefits of a critical illness insurance plan?
Critical illness insurance provides financial protection by paying a lump sum upon diagnosis of serious conditions like cancer, heart attack, or stroke. This coverage helps cover medical expenses, rehabilitation costs, and loss of income during recovery, offering peace of mind and financial stability during challenging times.
Coverage beyond hospitalisation:
Standard mediclaim policies typically cover critical illnesses only for expenses incurred during hospitalisation.. Reimbursement is limited to the costs associated with in-patient treatment. Conversely, critical illness insurance plans offer a lump-sum payment upon diagnosis of a covered critical illness. This benefit can be utilised for healthcare expenses, regardless of whether hospitalization is required.
Offers tax benefits
Critical illness plans offer tax benefits under Section 80D of the Income Tax Act, 1961. You can potentially save up to ₹75,000 by including a critical illness plan in your insurance portfolio. The lump sum amount received during a claim is also tax-free.
Provides a lump sum for treatment
This insurance provides a lump sum amount upon diagnosis, which helps manage various expenses beyond just medical bills.
Ensures easy claim access
Claim access is simplified; you generally only need to provide proof of diagnosis, eliminating the need for extensive bills and documents typically required in standard health insurance claims.
Comes with a shorter waiting period
Critical illness policies often have a shorter waiting period, allowing you to claim benefits soon after the policy's inception.
Secures financial future
A critical illness diagnosis often impacts a patient's ability to maintain their previous income level due to potential physical limitations. Simultaneously, the financial burden of medical treatment increases significantly. Critical illness insurance provides a financial safeguard for families. The lump-sum payout can be used to cover medical expenses, as well as everyday living costs, ensuring financial stability during a challenging time.
Rising medical inflation
Advancements in medical technology, including substantial investments in specialised equipment by hospitals, have improved treatment outcomes. However, this progress, coupled with general medical inflation, has driven up the cost of healthcare, particularly for hospitalisations.
For instance, the cost of Herceptin, a medication used in breast cancer treatment, ranges from Rs. 15,000 to Rs. 54,000 per vial. Treatment often requires approximately 16 vials. Consequently, patients may incur medication expenses between Rs. 2.5 lakh and Rs. 8.6 lakh during their course of treatment.
Inclusions of critical illness insurance policy
Here are the standard inclusions under the critical illness policy:
Critical illness health insurance provides coverage for up to 50 major critical illnesses, including coronary artery bypass surgery, stroke, kidney failure, major heart conditions, and organ transplants. The sum insured varies based on the insurer and policy terms. After 30 days of diagnosis (depending on the insurer), the insured receives a lump-sum payout for medical and lifestyle expenses. Additionally, many plans also cover annual health check-ups for preventive care.
Here is the list of critical illness disease which is covered under critical insurance policy.
- Cancer (up to a specified stage) – Covers specific stages of cancer where abnormal cell growth spreads uncontrollably, affecting tissues and organs. Coverage varies by insurer.
- First-time heart attack – Provides financial support for the first occurrence of a heart attack caused by reduced blood supply, leading to heart muscle damage.
- Open-heart coronary artery bypass graft – Covers surgery that improves blood flow to the heart by bypassing blocked arteries using grafts from other body parts.
- Open-heart heart valve replacement or repair – Provides coverage for surgical procedures to replace or repair damaged heart valves, ensuring proper blood flow regulation.
- Coma of specified severity – Covers cases of prolonged unconsciousness due to brain injury or disease, requiring life support and long-term medical care.
- Kidney failure requiring regular dialysis – Covers end-stage kidney disease where both kidneys lose function, requiring dialysis or a kidney transplant for survival.
- Stroke – Provides financial aid for strokes caused by blocked or ruptured blood vessels in the brain, leading to long-term disability or impairment.
- Major organ transplant – Covers expenses related to transplants of critical organs such as the heart, liver, lungs, or kidneys due to severe organ failure.
- Bone marrow transplant – Covers the costs of a bone marrow transplant, which is essential for treating blood-related diseases like leukemia and lymphoma.
- Permanent limb paralysis – Provides coverage for cases where injury or illness results in irreversible loss of movement in one or more limbs.
- Motor neuron disease (ALS) – Covers degenerative conditions affecting nerve cells in the brain and spinal cord, leading to progressive muscle weakness and loss of function.
- Multiple sclerosis – Provides financial support for this chronic autoimmune disease that affects the central nervous system, causing mobility issues and neurological impairments.
- Aplastic anemia – Covers bone marrow failure that leads to a shortage of blood cells, increasing the risk of infections, bleeding, and severe fatigue.
- Bacterial meningitis – Provides coverage for life-threatening inflammation of the brain and spinal cord membranes, which can cause severe complications if untreated.
- Loss of speech – Covers permanent loss of speech due to illness or injury affecting the vocal cords or related nerves and muscles.
- End-stage liver disease – Provides financial assistance for irreversible liver failure, often caused by chronic liver conditions, requiring a transplant or extensive medical care.
- Deafness – Covers complete and irreversible hearing loss in both ears, which significantly impacts communication and daily life activities.
- End-stage lung disease – Provides coverage for severe and irreversible lung conditions that impair breathing and require oxygen therapy or a lung transplant.
- Fulminant viral hepatitis – Covers acute and severe liver failure caused by viral hepatitis, leading to rapid deterioration and the need for urgent medical care.
- Major burns – Provides financial support for third-degree burns covering a significant portion of the body, requiring intensive medical treatment and skin grafting.
- Muscular dystrophy – Covers progressive muscle-wasting diseases that lead to loss of mobility and severe physical disabilities over time.
Exclusions of critical illness insurance policy
Here are the standard exclusions under the critical illness policy:
- There is no compensation if a person dies within 30 days of diagnosis of critical illness or surgery.
- Any critical illness developed due to smoking, tobacco, alcohol, or drug intake is not included in the policy.
- The critical illness developed due to internal or external congenital disorder is not included in critical illness insurance.
- Pregnancy or childbirth-related critical conditions are not covered under critical illness insurance.
- Adventure sports injuries, self-harm, and war injuries are not included in the critical illness policy.
- Critical illness diagnosed during the waiting period
- Death occurring within 30 days of critical illness diagnosis or surgery
- Illness arising from smoking, alcohol, tobacco, or drug use
- Critical illness caused by congenital internal or external disorders
- Conditions related to pregnancy or childbirth complications
- HIV/AIDS-related illnesses
- Dental care, cosmetic surgery, infertility, or hormone replacement treatments, and treatments conducted outside India
Who should buy a critical illness insurance policy?
A critical illness insurance policy is a smart financial move for anyone wanting to safeguard their future against the unexpected costs of serious health conditions. It offers a financial safety net when you need it most.
People with high-pressure jobs
Individuals in demanding careers often face increased stress levels, which can elevate the risk of developing critical illnesses. A critical illness policy provides financial buffer, allowing them to focus on recovery without worrying about income loss or mounting medical bills during a challenging time.
People over 40 years of age
As we age, the likelihood of being diagnosed with a critical illness tends to increase. Purchasing a critical illness policy in your late 30s or early 40s is a prudent step to ensure financial security when the risk factors become more significant. It also allows you to secure coverage potentially at more favorable premium rates.
People with family history of critical illness
If there's a family history of conditions like cancer, heart disease, or stroke, the genetic predisposition can increase your own risk. A critical illness policy becomes particularly important for these individuals, providing an extra layer of financial protection against potential hereditary health issues.
Who can benefit from critical illness insurance plan?
A critical illness insurance plan benefits anyone concerned about financial stability during serious health crises. It's particularly advantageous for individuals without sufficient savings or those seeking additional coverage beyond standard health insurance. This coverage ensures financial support for medical treatments, daily expenses, and other costs associated with critical illnesses, offering peace of mind during challenging times.
What documents are required for critical illness insurance?
The specific documents required for a critical illness insurance application can vary depending on the insurer and the individual's circumstances. However, some common documents typically requested include:
- Application form: A completed and signed application form provided by the insurance company.
- Identity proof: Documents to verify the applicant's identity, such as a passport, driver's license, Aadhaar card, or PAN card.
- Age proof: Documents to verify the applicant's age, such as a birth certificate, school leaving certificate, or passport.
- Address proof: Documents to verify the applicant's residential address, such as utility bills (electricity, water, gas), bank statements, or a ration card.
- Medical history: Details of the applicant's past and current medical conditions, including any pre-existing illnesses, surgeries, hospitalizations, and medications. This may involve completing a medical questionnaire.
- Medical reports: Copies of medical reports, diagnostic tests, and prescriptions related to any existing health conditions or recent medical evaluations. This could include reports from specialists.
- Financial information: In some cases, insurers may request financial information to assess the applicant's ability to pay premiums. This could include income statements, tax returns, or bank statements.
- Occupation details: Information about the applicant's occupation and nature of work, as some occupations may be considered higher risk.
A step-by-Step guide: How to choose critical health insurance
Buying any health insurance policy requires you to carefully analyse the policy details to ensure that there are no hidden fees and chargers, and you get maximum coverage at reasonable premium. Given below are the key things to remember when opting for a critical care insurance policy:
- Inclusions and exclusions: You must go through the inclusions and exclusions of the critical illness insurance policy. There can be instances where a policy may not cover the expenses for an illness that you consider a critical health condition.
- Calculate premium rates: When choosing a critical illness insurance plan, start by calculating premium rates based on your age, health status, and coverage amount. Compare quotes from multiple insurers to find a plan that fits your budget while providing adequate coverage.
- Find out the covered illnesses: Review the list of covered illnesses in each plan. Ensure that the policy includes major conditions like cancer, heart attack, and stroke. Understanding what is covered helps you select a plan tailored to your specific health concerns and risks.
- Sum insured: Consider the sum insured while checking different policy options. As the cost of treatment varies for different critical illnesses, checking the coverage amount becomes imperative before applying.
- Claim settlement ratio: Check the claim settlement ratio in health insurance of the insurer. The ratio indicates the number of claims the insurer has settled in a year.
- Waiting period: The waiting period is the stipulated time after which a policyholder can avail of the benefits of the insurance policy insurance policy. Check all the waiting periods mentioned in the document to be sure about when claims can be raised and will be accepted.
Tax benefits under a critical illness insurance policy
The fact that critical illness insurance offers tax benefits is an additional advantage, and you can claim tax deductions against the premium paid under the relevant sections of the prevalent tax laws.Tax benefits under a critical illness insurance policy allow you to claim deductions on premiums paid under Section 80D of the Income Tax Act, reducing your taxable income and providing financial relief while securing your health.
The deduction amount varies based on the age of the insured individual and their parents. Below is a breakdown of the maximum deduction you can avail under Section 80D:
Category
|
Self, spouse and dependent children
|
Parents
|
Maximum deduction U/S 80d
|
All insured individuals are below 60 years
|
Rs.25,000
|
Rs.25,000
|
Rs.50,000
|
Parents are 60 years or older
|
Rs.25,000
|
Rs.50,000 (including medical expenses)
|
Rs.75,000
|
Both insured individual and parents are 60+
|
Rs.25,000
|
Rs.50,000 (including medical expenses)
|
Rs.1,00,000
|
Save Tax with Critical Illness Insurance Policy
A critical illness insurance policy not only provides crucial financial protection during serious health challenges but also offers significant tax-saving opportunities under the Income Tax Act, 1961, making it a dual-benefit instrument for your financial well-being.
Dual benefit
A critical illness health insurance policy serves a dual purpose. It safeguards your finances against the high costs associated with treating severe illnesses and simultaneously allows you to avail tax benefits under Section 80D of the Income Tax Act, 1961, potentially helping you save up to ₹1 lakh by including it in your financial planning.
Tax deduction based on medical insurance premium paid
By purchasing a critical illness cover, you can claim a tax deduction of up to ₹25,000 per financial year on the premium paid towards the policy under Section 80D of the Income Tax Act, 1961. This deduction helps reduce your taxable income, offering direct savings on your tax liability.
Deduction on preventive health check-ups
Beyond the premium paid, you can also claim tax benefits on expenses incurred for annual preventive health check-ups under Section 80D of the Income Tax Act. You can claim a deduction of up to ₹5,000 every financial year for these check-up costs, further enhancing the tax-saving advantage of health-related expenses.
Deduction on medical insurance premium paid for parents
If you pay the medical insurance premiums for your parents, you are eligible for an additional tax deduction of up to ₹25,000 per financial year. If your parents or either of them are senior citizens, this deduction limit can extend up to ₹50,000, providing significant tax relief while ensuring your parents have adequate health coverage.
Importance of critical illness insurance in India
One of the most important benefits of this health insurance plan is the enhanced coverage. It covers a wide range of critical illnesses and helps the insured manage all associated healthcare expenses besides hospitalisation costs. critical illness health policy also offers a lump-sum amount that helps individuals manage healthcare costs in a better way.
How does critical illness insurance work?
Critical illness insurance, often referred to as critical illness cover, functions as a policy where the policyholder pays regular premiums to an insurance provider. In the unfortunate event that the insured individual is diagnosed with a predefined critical illness, a waiting period typically applies.
After this waiting period, the policy offers a tax-free lump-sum payout. This financial support can be utilised to cover medical expenses, debts, or any other financial obligations. The extent of critical illness policy coverage varies based on the specific critical illnesses listed in the policy.
Typically, once a successful claim is processed, the policy terminates, offering crucial financial protection alongside traditional health insurance.
Factors to consider before buying critical illness insurance
Choosing the right critical illness insurance requires careful evaluation of your individual circumstances and needs to ensure it provides adequate financial protection when you need it most.
No people dependent on you
If you don't have any dependents relying on your income, you might question the necessity of critical illness insurance. However, even without dependents, the financial burden of treating a critical illness can be substantial, potentially depleting your savings and impacting your future financial stability. This insurance can provide a safety net, ensuring your own medical and recovery expenses are covered, allowing you to maintain your independence without financial strain.
Your current health situation
Your current health is a significant factor. While you might be in excellent health now, critical illnesses can strike anyone unexpectedly. However, pre-existing conditions might affect your eligibility or the terms of the policy. It's crucial to be transparent about your health history when applying. Some policies might have waiting periods or exclusions related to pre-existing conditions, so understanding these details is vital before making a decision.
Choosing your sum insured responsibly
Selecting the appropriate sum insured is crucial. Consider your potential medical expenses, lost income during recovery, and any lifestyle adjustments you might need. The sum insured should be substantial enough to cover these costs without significantly depleting your savings. Evaluate the rising costs of healthcare and factor in potential future needs to ensure your coverage remains adequate over time.
Wider coverage for illnesses
While most critical illness policies cover major conditions like cancer, heart attack, and stroke, the specific illnesses included can vary. It's essential to review the list of covered conditions and choose a policy that offers broader coverage, aligning with your family's medical history and potential health risks. A wider scope of coverage provides more comprehensive financial security in various health crises.
Adds advantage to your health insurance policy
Critical illness insurance complements your regular health insurance policy. While a standard health policy covers hospitalization costs, critical illness insurance provides a lump sum that can be used for various expenses beyond hospitalization, such as ongoing treatment, rehabilitation, loss of income, and lifestyle adjustments. Having both types of policies ensures comprehensive financial protection against a wide range of healthcare scenarios.
Maximum age limit
Most critical illness insurance policies have a maximum entry age, typically around 65 years. It's important to be aware of this limit, especially if you're considering purchasing a policy later in life. Buying a policy at a younger age not only ensures coverage but often comes with lower premiums and potentially fewer restrictions.
How to buy critical illness insurance
Purchasing critical illness insurance involves a few key steps to ensure you choose the right policy for your needs:
- Assess your needs: Determine the appropriate sum insured based on your income, potential medical expenses, and financial obligations. Consider your age, lifestyle, and family medical history.
- Research different insurers: Compare various insurance providers and their critical illness plans. Look at the list of covered illnesses, waiting periods, claim processes, and customer reviews.
- Compare policy features: Analyze the specific features of different policies, such as the number of covered illnesses, any add-on riders, and the terms and conditions.
- Check the waiting period: Understand the waiting period before the policy benefits become active. Some policies have a specific waiting period after purchase before a claim can be made.
- Understand exclusions: Be aware of any exclusions in the policy, such as pre-existing conditions or specific illnesses that are not covered.
- Read the policy documents carefully: Before finalizing, thoroughly read and understand all the terms and conditions, including the claim process and any limitations.
- Seek expert advice: If needed, consult with a financial advisor or insurance agent to get personalized guidance based on your specific situation and requirements.
- Consider online purchase: Many insurers offer online platforms to compare and purchase policies, often providing a convenient and transparent process.
- Ensure timely premium payments: Once you purchase the policy, ensure you pay your premiums on time to keep the policy active and avoid any lapses in coverage.
