With lifestyle illnesses, such as cancer, heart attack, stroke, paralysis, becoming more common and advances in medical technology ensuring patients survive such ailments, critical illness (CI) covers are the third essential risk protection, after term life and health insurance.
"Today, you can insure so many things. We insist on life and health insurance for all clients. But, if they can afford it, we also recommend they buy a CI cover. The advice is to first check which risk they can afford to retain and which they cannot. For instance, medical risk should not be, retained as chances of a normal disease occurring are much higher. But, if cost is an issue, the client might choose to retain the critical illness risk, as chances of this occurring are less," says a financial planner.
A family history of a certain illness - cancer, heart ailments, stroke - are also why a CI cover is recommended, but budget can be a constraint, says Deepali Sen, partner, Srujan Financial Advisers. "One of my clients had a family history of brain disorders like multiple sclerosis and dementia. As he was in a high pressure job, I recommended CI for him," she says.
It is not only hereditary.In India, 1.1 million new cancer patients are diagnosed. Of this 600,000 people die, says Purvish Parekh, head, director of precision oncology and research at Asian Institute of Oncology at Somaiya Ayurvihar: Cancer Care. "Only five per cent of the cancer cases are hereditary. The remaining 95 per cent are because of one's lifestyle. Insurance is also vital because the average cost of cancer treatment is Rs 3-4 lakh," he adds.
A CI cover can be used for any expense, medical treatment and also as replacement of income, if the insured is unable to work. S Prakash, executive director, Star Health and Allied Insurance, says: "CI cover is important in the current situation, as the cost of treatment can burn a big hole in your pocket. Also, prolonged treatment can be a very frustrating experience and the insured most likely would have to spend out of pocket. Hence, apart from a regular health cover, it would be advisable to take a separate CI cover, either on an indemnity basis or a benefit basis."
Regular health insurance will pay only for the expense incurred on medical treatment, and only the extent covered. But, a CI cover will pay a lumpsum as benefit when diagnosed. Tarun Chugh, chief executive officer (CEO), PNB MetLife, says: "In a CI, the entire family is involved. You spend money on travel, hotel stay and food from outside, doctor charges."
|Choosing a critical illness policy|
Rider or standalone policy
If you choose a CI cover, as an add-on or rider, the sum assured will be restricted to the sum assured of your base policy, says Naval Goel, CEO, PolicyX.com. "You will not have the flexibility to choose the sum assured. Whereas, if you choose a CI cover as a standalone policy, you can choose a higher sum assured, which might cost you more on premiums but give more benefits," he explains.
Critical illness, if taken as a rider or add-on to the existing policy, might force you to renew your health or life policy in order to keep going with your critical illness policy, Goel adds. In some life insurance policies, the CI rider might give an additional amount if the death is on account of such an illness. Though this is a good cover to have, it comes to the nominee only on death of the policyholder,says Deepak Yohannan of MyInsuranceClub.com.
Who should take it?
Ideally, everyone should take it. However, in cases where the wife is not earning, she need not take a CI policy or she can buy a smaller cover than the husband, says a financial planner. "Treatment cost can be equally devastating for the wife. That is why she can take a smaller amount." he says.
Yashish Dahiya, CEO, Policybazaar.com, says in many cases, the sum assured for the CI cover is linked to a person's income. In such cases, the non-earning spouse will not get a very high cover.
"The insured can initially opt for a CI add-on cover along with a regular health cover. With advancement in age, he can progressively increase the amount of CI coverage. This way he can ensure adequate protection and optimal premium," says Prakash.
Single or multiple disease cover?
Last week, Aegon Religare Life launched iCancer, a CI cover only for this. According to Shamik Banerjee, chief marketing officer, cancer is an expensive disease to have, challenging the family's financial condition. There have been cases of cancer where a family's entire savings were wiped out with the treatment. About two months earlier, HDFC Life too had launched Cancer Care, a CI policy for cancer alone. Since the launch in May, the company has sold 49,000 policies says Sujoy Manna, vice-president, HDFC Life. "The cost for cancer treatment is going up. That is why a policy for cancer is useful," he says.
Both these these products cover early, middle and major stages of cancer. They also cover all kinds of cancer. Whereas CI covers that cover multiple diseases cover only the late or major stage of cancer and only certain kinds of cancer.
Also, in the case of both Aegon Religare and HDFC's policies, the cover will continue even if the policyholder is diagnosed with early-stage cancer and has survived it. In the case of other CI covers, the cover will cease to exist once the payout is done. Once you make a claim for one particular CI, you will not be covered for that illness again.
But a CI policy that covers more number of diseases might seem more beneficial, given that they cover several diseases.
For instance, PNB Metlife Major Illness Premium Back Cover offers protection from 35 illnesses. Apollo Munich's Optima Vital covers 37 critical illnesses. However, the ailments are covered only after a certain level of severity, notes Dahiya.