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Critical illness policies pay the entire benefits as a lump sum amount when the insured is diagnosed with such conditions. The sum assured is paid in total irrespective of the treatment cost.

Generally, a person diagnosed with a critical illness may be unable to fulfill his duties as an employee for an extended period of time. Although the treatment costs may be covered under the health plan, the individual may face severe financial difficulties due to loss of regular income.

The critical illness benefit amount is useful to avoid a liquidity crisis. The critical illness insurance amount has no limitation on its use and the policyholder may use it to meet his financial liabilities, such as loan installment, children education fees, or regular home expenses.

Critical illness coverage is available as:

• A rider along with a life insurance policy from a life insurer
• A standalone policy from a general insurer

Here are four salient features of a critical illness policy.

1. Policy Term

Generally, a life insurance policy term is between 10 and 30 years. A critical illness rider included within the life plan will have the same term as that of the original policy. The critical illness benefit ends when this term is over. Therefore, individuals lose such coverage on the maturity of their life insurance policies, which is often at an older age when most people would require these benefits. In comparison, standalone critical illness policies are available for a tenure of one to three years. Moreover, most general insurers offer standalone policies with a lifetime renewal option for the convenience of policyholders.

2. Premium Amount

Both standalone critical illness policies, as well as coverage taken as a rider, provide the option of increasing premium amounts over the years. A common misconception among people is that since the life insurance premium does not change during the policy term, the premium on the rider also remains constant. However, the fact is that policyholders have the flexibility of increasing the rider premium every 3 to 5 years.

3. Sum Assured

When an individual acquires critical illness cover as a rider along with a life insurance plan, the sum assured on the rider is restricted to the amount of the original policy. On the other hand, there is no restriction on the sum assured when a person opts for a standalone critical illness policy. However, he must check for any restrictions that may be imposed by the insurer for the specific products.

4. Illnesses Covered

Most riders purchased with an existing life insurance plan limit the number of illnesses that can be covered. In comparison, standalone policies provide wider coverage by including a higher number of critical ailments. Furthermore, an individual must check how pre-existing conditions are treated while researching on critical illness policies. This will allow a person with an existing condition to make an informed decision. Most indemnity-based life insurance policies do not cover existing ailments even at the end of the waiting period. A majority of insurers do not provide benefits under the insurance policy for pre-existing conditions for a period of 2 to 4 years.

5. Claim Process

Policyholders must carefully review the survival and waiting periods before making any decision. Both these periods affect the claim procedure if such a need arises in the future. Survival period is the minimum number of days (often 30 days) a person must survive after being diagnosed with an illness to be eligible for a claim. Waiting period (90 days or more) is the number of days for which no benefits are paid if a person is diagnosed with any medical condition included in the policy. This limitation is applied to prevent fraudulent claims by policyholders. Furthermore, policyholders must remember that the critical illness benefits are not automatically paid if they are diagnosed with a severe medical condition. Most insurers have severity criteria for various conditions that are covered under these policies. Only if the diagnosis meets these severity conditions, the insurers will pay the benefits to the policyholders. In case these criteria are not met, the companies may reject the claims.

Critical illnesses are on the rise because of the unhealthy and stressful lifestyle led by most people. To ensure no financial difficulties arise in the case of being diagnosed with such a condition, acquiring critical illness insurance is important. However, understanding all the terms and conditions before availing of the policy will prevent inconvenience in the future.

About HDFC Life

HDFC Life, one of India’s leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life’s product portfolio comprises of solutions, which meet various customer needs such as Protection, Pension, Savings, Investment, Health and Online Term Insurance.