Why critical illness covers are a must

Mediclaim and a critical illness policy serve different objectives

Critical illness insurances pay a fixed amount if you develop any of the diseases covered. These insurances first made their entry about 15 years ago as riders attached to life insurance plans. Most sales persons, at that time, did not like these insurances because they required several medical tests; this was a major reason for sales drop-out and claim settlement being poor. At that time, insurers had their own definition of these diseases depending on the reinsurers they worked with. From that tentative start, these insurances, however, have come a long way.

Health insurers have taken the lead in introducing stand-alone critical illness plans that are comprehensive and many of them have established a claims payment track record.

The incidence of critical illnesses is alarming. Look around your close family and friends and there will be instances of cancer and heart disease. It’s also evident that these diseases are increasingly striking younger people. The case to buy critical illness insurance has never been stronger.

Many buyers do not differentiate between a regular mediclaim health insurance and a critical illness plan. This is a mistake because the two serve different objectives and complement each other.

Mediclaim reimburses hospital costs but critical illness pays a fixed amount independent of cost. Mediclaim covers hospitalisation for any reason but critical illness pays only for pre-identified diseases. Mediclaim is renewable for life whereas the critical illness plan is extinguished after the first claim.

How to choose?

Price and claims-settlement track record are two criteria common for all insurances. However, criteria specific to selecting critical illness insurances are the number and type of diseases covered, period for which pre-existing diseases are excluded, maximum sum assured allowed and requirements for survival period. The number of diseases covered range from under 10 to 37 in a single insurance. It is not just the number that is important but also the kind of diseases. I prefer critical illness plans that cover diseases such as blindness, deafness, loss of speech, Alzheimer’s, multiple sclerosis or stroke because they do not require significant hospitalisation. In that sense, their coverage in a standard mediclaim insurance is limited. Apollo Munich’s critical illness insurance does well on both the number and type of diseases covered. I am wary of insurances that permanently exclude pre-existing conditions because there is always a niggling worry that a future claim may be denied. Some insurers such as Tata AIG and HDFC Ergo restrict the exclusion period to four years, which is good.

Treatment costly

Critical illnesses are expensive to treat. Cancer, organ replacements, CABGs or open-heart surgeries cost over ₹10 lakh. These costs are increasing at over 15-20 per cent each year, which means that a decade from now, it may cost over ₹50 lakh to treat a critical illness. That’s why a large sum assured helps. Since all critical illness plans are renewable lifelong, the insurance you buy today is something you can keep for many years before using. Max BUPA and Religare are insurers that offer over ₹1 crore of critical illness cover.

Critical illness plans often mandate a survival period of 30-90 days to be eligible for a claim. This refers to the time that you must survive after being diagnosed to be eligible for a claim. I don’t like this restriction because there can be many cases where a person may not survive this period. This is most common in the case of heart disease and strokes. Some insurers such as ICICI Lombard do not require a survival period in their insurance.

Some months ago, 600 claims were analysed across 20 companies with group health insurance. Fifty of them were critical illnesses and 15 breached the sum assured limit that meant that patients were out of pocket, a situation that a critical illness plan would have prevented.

The writer is Managing Director, www.securenow.in

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