Critical illness cover: Should you buy it with health or life insurance?

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According to the latest NCRP Report 2020 (National Cancer Registry Programme) released by ICMR and National Centre for Disease Informatics and Research, the total number of cancer cases in the country is estimated to rise from 13.9 lakh in 2020 to 15.7 lakh by the end of 2025. In order to ease the financial constraints linked to such diseases, Indians are increasingly opting for comprehensive critical illness insurance plans.

A typical critical illness cover offers lump sum benefits for the treatment and recovery expenses arising from specific life-threatening illnesses insured under the plan. In case the insured is left with a surplus, it can also be used to pay any impending debts. Illnesses covered under this policy include cancer, heart stroke, kidney ailments, etc. Most insurers cover as many as 36 specific illnesses in a critical illness plan. Moreover, one can certainly buy multiple critical illness covers and each would be liable to pay for your illness.

Such type of cover will lapse soon after the insurer executes the payment. As per the rule, the lump sum amount is paid to the insured after a survival period that extends up to 30 days after contracting the illness. In fact, critical illness cover can be bought with health insurance as well as life insurance.

Health insurance

Buying a critical illness cover (rider or standalone policy) alongside a regular health insurance policy will offer a pre-defined lump sum for the diagnosed critical illness as well as pay for hospitalisation expenses for such treatments. If you were to compare the need for both covers, health insurance takes a comfortable lead. The chances of getting diagnosed with a specific critical illness is less than various other less-critical diseases.

Besides, health insurance has a wider coverage (hospital bills, pre and post-hospitalisation expenses, ambulance charges, daycare treatments, etc.) compared to that of a critical plan that is extremely narrow in approach.

“A comprehensive indemnity health plan would cover all types of illnesses and injuries, even critical illnesses. If you suffer from a critical illness, the health plan would cover the treatment costs. Moreover, even if you don’t suffer from a critical illness but are hospitalised for any other illness or injury, the policy would cover your hospital bills, a coverage that is absent from critical illness plans. However, critical illness plans are a fixed benefit plans and can be taken along with your indemnity health insurance plans,” Dhirendra Mahyavanshi, co-founder at TurtleMint, told Money9.

Life insurance

If you’re looking to buy a critical illness cover with life insurance, there are two types of riders with the premium amount varying to certain degrees.

— Additional Benefit: In addition to the regular base sum assured of your life insurance, a critical illness sum assured will also be paid. This will, however, not impact the life insurance sum assured.

— Accelerated Benefit: Here, the benefit is optionally built-in with your life insurance policy. This means the critical illness sum assured will be reduced from the total life insurance sum assured at the time of such a claim. The life plan continues with the reduced sum assured (minus the critical illness sum assured claimed previously).

Meanwhile, you have the option to buy a standalone critical illness cover from your life insurer as well. But one must keep in mind that hospitalisation expenses don’t come with life insurance that has added critical cover as a rider. People often confuse death benefit with critical illness treatment. But these are independent events that require different approaches.

What should you do?

The first thing is to remember that critical illness plans are meant to provide extra security to your health cover. It should ideally complement a good health insurance policy that covers your entire treatment cost. It shouldn’t be looked upon as a replacement for your life insurance or health insurance.

Experts always suggest opting for a standalone critical illness policy alongside a comprehensive health insurance plan. Make sure to review the number of illnesses covered under the former plan and add a cover accordingly. You can also review the family history of diseases before selecting the critical illness plans. It will help you narrow down specific diseases that can cause worry and the need for financial security in the future.