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A Helping Hand

Chandralekha Mukerji | Print Edition: October 2012

Do you need extra insurance for life-threatening ailments when you have a comprehensive health plan and, maybe, a group cover from your employer? In such a case, why buy another insurance policy and clutter the portfolio?

But what if you are diagnosed with a critical ailment that requires specialised care while your health plan has a limit on doctors' fees and, thus, won't cover the full cost of treatment? Or, say, there is a cap on specific expenses such as on medicines, intensive care unit or prosthetics and your bill is more than what the insurer will pay. In such cases, you'll have no option but to pay from your pocket.

Insurance Tips: Buying health cover? Eye out medical costs

Acute illness can also mean loss of income, total or partial disability and change in lifestyle. The financial burden could be far more than what an indemnity health plan, which pays hospital bills, would cover. Buying a critical illness plan is the best way to get over these shortcomings.

While an indemnity policy covers hospitalisation, a critical illness plan pays a lump sum on diagnosis of serious ailments listed in the policy document.

Quote

Consider the list of illnesses covered, sum assured, the claim procedure and the claim payment history before buying the plan.

S SUGATHAN

Head, Health Administration, Bajaj Allianz General

The lump sum that you get can be used for various purposes such as to pay for expensive treatments or recuperation aids, make up for loss of income due to fall in the ability to earn or pay off debts. Both these plans provide benefits in different ways.

A critical illness plan is a supplement to your health insurance portfolio.

BALANCING ACT

The purpose of a critical illness cover is paying for expensive treatments. Plus, it is much cheaper than an indemnity plan. For instance, a comprehensive health plan for a 30-year-old with a sum insured of Rs 5 lakh costs around Rs 6,000 a year. A critical illness policy with the same cover costs Rs 1,500 a year.

"A comprehensive health plan covers a wide range of risks and is therefore significantly expensive than a critical illness plan that covers specific situations," says Arvind Laddha, chief executive officer and managing director, Vantage Insurance Brokers & Risk Advisors.

A combination of comprehensive health insurance and critical illness cover can give a good balance between pricing and coverage. "A Rs 5 lakh indemnity cover along with a Rs 10-15 lakh critical illness cover should be a decent mix," says Mukesh Kumar, head of strategic planning, HDFC ERGO.

WHAT TO BUY

Critical illness covers are fixedbenefit plans. One gets the full sum insured irrespective of whether one is hospitalised or not or what the treatment expenses are. However, details vary from plan to plan. For instance, most plans have a survival period clause says the insured must survive for at least 30 days after he or she is diagnosed with any critical illness to file the claim. But a few plans, such as ICICI Lombard's Critical Care, do not have this clause.

The number of critical illnesses covered also varies. For instance, ICICI Prudential's Crisis Cover protects against 35 illnesses, Bharti AXA's Smart Health covers 20 while Aviva's Health Secure pays for 12 ailments.

The built-in coverage also differs from policy to policy. While some insure accidental death and partial or total disability due to accidents, some don't.

"One should evaluate and compare a few different plans to decide which suits one the best. Consider the list of illnesses covered, the cover amount, the claim procedure and the payment history of the insurer," says Suresh Sugathan, head, health administration team, Bajaj Allianz General Insurance.


Here are some points that must be considered while shopping for a critical illness policy.

1. THE RIGHT SIZE
The best way to decide how much cover you need is to know what the company is charging you for. If you know the benefits offered, it will be easier to decide how much protection you need.

Keep in mind factors like treatments costs, recurring costs and future financial liabilities in case of income loss.

"Age and medical history are important while deciding the appropriate sum insured," says Sanjay Datta, chief, underwriting and claims, ICICI Lombard General Insurance. The sum insured should be higher for the aged as they are more likely to develop chronic ailments.

Also take into account existing covers such as Mediclaim or personal accident and disability insurance policy.

2. STANDALONE OR RIDER?
While a critical illness plan can be bought as a standalone policy, critical illness riders are typically clubbed with life or health insurance plans. The policy terms and conditions under both the options are more or less the same. The choice between a standalone policy and a rider depends on your requirement.

Policy Check

While buying a critical illness plan, check for the following and get the best benefits.

Illnesses covered: Evaluate the list of critical illnesses covered. If you have a family history of cardiac ailment or any other major illness, make sure these are covered.

Adequate sum insured: Consider the average cost of treating major illnesses while evaluating the cover size. Do not forget to take into account inflation.
Generally, a standalone policy offers more flexibility in choosing the sum insured and larger covers compared to riders. The limit on sum insured under a rider is usually the same as the base policy. So, if you have a health plan or term insurance of Rs 5 lakh and buy a critical illness rider with it, it is unlikely that the insurer will offer you a sum insured of more than Rs 5 lakh for the add-on cover.

There will be a difference in pricing as well. A standalone critical illness policy will cost more as it comes with the option of choosing a higher sum insured.

"The advantage of a standalone critical illness plan is that it is not compulsory to renew your health or life plan if you want to keep the critical illness cover. Riders are recommended as clubbing covers can facilitate easy management," says Gaurav Rajput, director, marketing, Aviva India.

Moreover, critical illness plans are sold by both life and general insurance companies. The only major difference is that life insurers offer policies with longer tenures. So, while ICICI Prudential's Crisis Cover has a maximum term of 50 years, ICICI Lombard's Critical Care can be bought for a term of five years.

SHOULD YOU BUY A SPECIAL PLAN?
Some critical illness plans are designed for special groups such as women and senior citizens and provide covers keeping in mind their unique needs. For instance, Bajaj Allianz offers women-specific critical illness insurance covers for breast cancer, ovarian cancer and cervical cancer. It also pays 50% sum insured if the insured's child has congenital disability and provides bonus for children's education and in case of job loss.

However these plans can be slightly costly. For instance, if you buy the women-specific plan from Bajaj Allianz, a cover of Rs 2 lakh for a 30-year-old will cost Rs 938 per year. But if you buy a standard critical illness cover with a higher sum insured of Rs 3 lakh, the cost will be Rs 900 a year.

Critical Choice

Maximum renewability:
While some plans give lifelong renewability, some cease as early as at 50 years.

Age:
Older people should buy larger covers. They are not only more vulnerable to these illnesses, the indemnity health plans available for them are expensive and have low sum insured. The plans also have strict terms and conditions such as higher sub-limits and co-payment.

Policy tenure and sum insured:
Life insurance companies usually sell policies with longer tenures. Also, the sum insured under these plans is higher than what general insurance companies usually offer.

Survival and waiting period clauses:
The survival clause says the insured must survive for a certain number of days after the diagnosis to make a claim. It is usually 30 days, but can vary. The waiting period refers to a certain period (usually 90 days) from the inception of the policy for which the illnesses are not covered. This can vary from policy to policy.

Sub-limits:
A few insurers put a cap on the amount that can be claimed under certain ailments.

Claims:
Understand the claim procedure and check the claim payment history of the insurer.

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