Simplifying Life Insurance in India
Critical Illness Rider in Life Insurance
A critical illness rider is an important add-on that can ensure the financial stability of a family in difficult times when a family member is diagnosed with a crucial medical condition that demands huge treatment costs.
It provides financial coverage for treating specific critical illnesses and is an essential investment in today's world, where medical treatment costs are skyrocketing.
Let's explore the details of critical illness riders and how they can provide financial security to you and your family during tough times.
What is a Critical Illness Rider?
A critical illness rider is an add-on feature in a life insurance policy that ensures financial stability during a medical crisis. It can be added for a nominal additional charge and provides coverage against a range of critical illnesses like cancer, heart attack, stroke, kidney failure, and other such ailments.
If the insured is diagnosed with any covered illnesses, the rider provides a lump sum amount to the beneficiary. This amount can then be used to cover medical expenses or other financial needs, thus ensuring that the treatment is not compromised, or the family does not suffer due to scarcity of funds.
The critical illness rider can be especially beneficial for individuals with a history of critical illnesses in their family or those working in high-risk professions. Depending on the insurer, it can be purchased at the policy's inception or on the plan anniversary.
Is It necessary to buy a Critical Illness Rider?
No, it is not a necessary addition to your life insurance policy. However, it is suggested to buy a critical illness rider to enhance financial cover. It provides financial protection against a range of critical illnesses that may require expensive medical treatment.What is Considered as Critical Illness?
Critical illness refers to severe health conditions that typically require crucial medical attention, treatment, and recovery time.
These illnesses often have a high cost of treatment and thus, become a financial burden, not just because of treatment expenses but also loss of income of the patient during treatment.
Although the specific list of critical illnesses can vary depending on the insurance provider or healthcare policy, a list of some common illnesses is discussed in the next subhead.
What Diseases are Covered in a Critical Illness Rider?
Critical illness rider provides coverage against a pre-defined list of critical illnesses. Though IRDAI has defined a list of 50 critical illnesses, the covered ones may vary from one insurer to another.
Some common critical illnesses covered by most insurers include:
- Cancer of specified severity
- Heart attack
- Stroke
- Kidney failure
- End stage lung failure
- End stage liver failure
- Major Head Trauma
- Loss of Speech
- Third Degree Burns
- Major organ transplant
- Multiple sclerosis
- Permanent Paralysis of Limbs
- Aorta surgery
- Benign brain tumour
- Blindness
- Deafness
- Coma of specified severity
- Parkinson's disease
- Alzheimer's disease
- Motor neuron disease (ALS)
The exact list of illnesses covered may vary from one insurer to another, and some insurers may offer additional coverage for other critical illnesses. It is essential to carefully review the policy document to understand the list of illnesses covered and any exclusions that may apply.
How Does a Critical Illness Rider Work?
1. Waiting Period
After you buy a critical illness cover, there is usually a waiting period of 30-90 days depending on the insurer. During this period, you can’t raise a claim.2. Diagnosis of a Covered Illness
If you are diagnosed with a critical illness covered under the rider, you become eligible to receive the lump sum payment provided by the rider, provided the terms and conditions of the policy are met.3. Survival Period
There is usually a survival period of 15-30 days after the diagnosis before you can claim the benefit.4. Lump Sum Payment
If all prerequisites are met, the policyholder receives a lump sum payment from the insurer as per the claim and the policy specifications.
Let’s take the example of Mr. Saha.
Mr. Saha bought a term plan of 1 crore for 15 years and added a critical illness rider of 10 lac coverage, for a nominal premium.
After 3 years, Mr. Saha is diagnosed with cancer. Thankfully, the disease is covered under his critical illness rider.
However, Mr. Saha had to wait for the survival period of 30 days after which he received the coverage amount of 10 lacs. He used this amount for his chemotherapy and other best treatments possible, thus recovering completely.
Unfortunately, cancer relapsed after 8 years. This time, he could not claim the critical illness rider since it can be claimed just once. Also, he didn’t survive the required survival period of 30 days. In this case, after his demise, the beneficiary is paid the sum assured of 1 crore under his base term plan.
Benefits of Buying a Critical Illness Rider
Here are some of the major benefits that you can avail with a critical illness rider:
Financial Protection Against Critical Illness
A critical illness rider offers financial protection against a range of critical illnesses that may require expensive medical treatment. It provides a lump sum payment to help cover the costs of medical treatment, hospitalization, and other related expenses. Thus, it is an excellent option for individuals who want to ensure that they are protected against the financial impact of a critical illness.
Income Replacement
Being affected by a critical illness affects the individual’s ability to earn. Thus, it might be difficult for the dependent family to deal with financial requirements. In such a case, the extra payout from a critical illness rider, can serve as financial support after paying for the treatment of the illness.
Covers Expensive Treatment for a Wide Range of Illnesses
The critical illness rider covers a wide range of illnesses, as specified in the policy. With this rider in hand, expensive treatments can be afforded, and critical illnesses can be treated.
Flexibility
Critical illness riders are flexible and can be customized to suit your specific needs. You can choose the amount of coverage you need, the duration of the policy and can add it during the policy tenure, on any policy anniversary.
Affordable Premiums
Critical illness riders are relatively affordable, making them accessible to a wide range of individuals. The premiums are based on your age, health, and the amount of coverage you need. They can be added to your base plan with just a nominal additional premium.
Tax Benefits
Premiums paid towards a critical illness rider are eligible for tax benefits under Section 80D of the Income Tax Act, 1961. This can help you save money on your taxes while also ensuring that you have comprehensive coverage against critical illnesses.
Who Should Buy the Critical Illness Rider?
1. People with a Critical Illness History in the Family
Individuals with a family history of critical illnesses such as cancer or heart disease must consider adding this rider. Since they are at an increased risk of being diagnosed with such illness, a critical illness rider provides the added protection needed.2. Primary Earners
For the primary breadwinners in a family, a critical illness rider is crucial. It ensures financial stability and support if the primary earner is diagnosed with critical illness, covering the treatment costs and the loss of income.3. People with Dependents
If you have dependents relying on your income, this rider is a safeguard. It helps maintain their lifestyle and cover essential expenses during difficult times, ensuring their well-being.Factors to Consider While Buying a Critical Illness Rider
1. Coverage
The critical illness rider increases the survival chances of the policyholder by providing funds for availing the best available treatment. Thus, choose the coverage carefully after evaluating your requirements. Consider your illness history, family genetics, the rising treatment costs etc. and accordingly choose the coverage amount.2. Illnesses Covered
While major diseases are covered by most insurers, the list differs across plans and insurance providers. They have different coverage options. Choose the one that provides comprehensive coverage for the critical illnesses you are most likely to face.3. Waiting Period
Most riders have a waiting period of 30-90 days, during which time you cannot make a claim for any critical illness. Make sure you consider the applicable waiting period while selecting the critical illness rider. Choose a rider with a waiting period that you are comfortable with.4. Survival Period
Survival Period is another essential clause of most critical illness riders. It is the duration after the diagnosis of a critical illness during which a claim can’t be made and typically ranges from 15-30 days. It is a very crucial factor to consider while selecting rider since a lower survival period means an early claim settlement and thus early access to treatment.5. Claim Settlement Process
You should also consider the claim settlement process for the rider. You need to ensure that the process is simple and hassle-free, and that the insurer has a good track record of settling claims in a timely and efficient manner. You can check the claim settlement ratio of different insurers to make an informed decision.
By considering these factors, you can choose a critical illness rider that meets your needs and provides comprehensive coverage for critical illnesses.
In today’s times when lifestyle diseases are increasing every day and treatment costs are skyrocketing, a coverage extending beyond the limits of usual health insurance has become a necessity.
Thus, a critical illness rider can be a valuable addition to a life insurance policy for individuals looking to protect themselves and their families against the financial impact of a critical illness.
FAQs about Critical Illness Rider
Can I claim twice for the same illness under the critical illness rider?
Can the payout from a critical illness rider be used for any purpose?
Do all life insurance policies come with a critical illness rider?
How is a critical illness rider different from a regular health insurance policy?
What is the eligibility for buying critical illness rider?
What are the documents required for critical illness rider claim?
Most commonly, the following documents are required to claim a critical illness rider:
- Claim intimation form
- Attending doctor’s certificate
- Copy of all medical records
- Original policy certificate
- Cancelled Cheque
Does term insurance provide critical illness rider?
What are the common exclusions under critical illness rider?
The most common exclusions under a critical illness rider are:
- Pre-existing conditions
- STDs, AIDS, HIV
- Self inflicted injury or suicide
- Substance abuse
- Aviation, other than in a commercial aircraft
- Adventure sports
- War
How is the payout from critical illness rider received by the beneficiary?
Can I buy a critical illness rider once I'm diagnosed with a critical illness?
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Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
