All You Need To Know About Critical Illness Benefit under Life Insurance

A rapid increase in the cost of healthcare has emerged as a major concern in India. In 2019, healthcare inflation rose at double the rate of retail inflation, which means the cost of medical care is rising faster than that of other goods and services.

Rising cost coupled with increasing incidence of lifestyle diseases has made having a financial buffer important. Most people purchase a health insurance plan with the aim to manage health emergencies. But health insurance may prove to be inadequate in a large number of cases. Life insurance plans with critical illness benefits can be the answer to inadequate health cover.

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What is the Critical Illness Benefit Under Life Insurance?

The Critical Illness Benefit under life insurance is an added layer of protection that offers financial support in the event of a serious health diagnosis. Typically offered as a rider or optional add-on to a base life insurance policy, it provides a lump sum payout if the insured is diagnosed with a specified critical illness during the policy term. These illnesses are predefined by the insurer and usually include conditions like cancer, heart attack, stroke, kidney failure, and other life-threatening diseases. The benefit is paid out upon diagnosis (subject to a survival period, usually 30 days), helping the policyholder manage treatment costs, replace lost income, or cover other financial needs during recovery.

This payout is not linked to hospitalisation or treatment bills, giving the insured complete flexibility in how the funds are used. It acts as a financial cushion, especially when income stops or expenses surge due to the illness. Since critical illnesses can strike unexpectedly, this rider ensures you're financially equipped to focus on recovery instead of worrying about costs. Opting for this benefit can be a proactive way to safeguard long-term financial stability in the face of serious health challenges.

Why is Critical Illness Cover Needed?

When one hears about anything related to a disease or hospitalisation, health insurance is the first thing that comes to mind. Health emergencies have the power to significantly impact a person's financial position. If you do not have adequate insurance coverage, treatment of critical diseases can deplete your savings.

Health insurance plans have a few gaps which can be filled by critical illness cover. The treatment of critical diseases like cancer or heart and liver ailments is extremely expensive. A single dose of medicine in the case of certain types of cancer can cost several thousand rupees and a successful treatment requires multiple doses. The bill for treatment of cancer can run into several lakhs of rupees. Most health insurance policies generally cover only the cost of hospitalisation.

The total cost of a critical illness can be significantly more than the expenses incurred for treatment. Critical illnesses often leave the affected individual debilitated. It can lead to a loss of income and can even affect the employability of the individual.

How Does a Critical Illness Cover help?

There are various types of life insurance policies. Life insurance can be used to financially secure your family in your absence as well as a savings instrument. But the primary goal of a life insurance policy is to provide a financial buffer to your family in your absence. Life insurance policies like a term plan pay a lump-sum amount in the event of the insured’s death. With a critical illness benefit, the life insurance policy pays a lump-sum amount to take care of the various costs associated with the illness. The amount paid is equal to the sum assured as part of the critical illness benefit rider and is generally separate from the death benefit or maturity benefit guaranteed by the policy. Some insurers deduct the amount paid as critical illness benefit from the sum assured and accordingly revise the death benefit. Some insurance companies pay the critical illness benefit over and above the sum assured.

Which Diseases are Included Under the Critical Illness Covered?

The critical illness benefit typically covers a broad range of serious health conditions, and while the core list is similar across most insurance providers, there may be slight variations in the exact illnesses included. Commonly covered conditions include heart attack, cancer, stroke, paralysis, major organ transplant, and kidney failure, among others. These are life-threatening illnesses that often require expensive treatment and long-term care, which the benefit is designed to help manage. It's always advisable to check the specific list of covered illnesses in your policy document, as definitions and inclusions may differ slightly from one insurer to another.

When is Critical Illness Benefit Paid?

The disbursal of funds under the critical illness benefit is not dependent on the treatment of the disease. Insurance companies pay the critical illness benefit taken with life insurance policies as soon as the insured is diagnosed with an illness covered under the critical illness benefit rider.

Conclusion

When purchasing a life insurance policy, many individuals tend to overlook the importance of adding a critical illness benefit. However, this add-on can play a vital role in providing financial security during a medical crisis. It serves as a valuable supplement to your existing health insurance by offering a lump sum payout upon diagnosis of a serious illness, money that can be used for treatment, lifestyle adjustments, or managing household expenses during recovery. 

The iSelect Smart360 Term Plan by Canara HSBC Life Insurance offers a terminal illness benefit as a standard feature and also allows for flexible customisation to suit your specific protection needs. With a wide range of coverage options, including critical illness benefits, this plan is designed to provide both peace of mind and financial stability in difficult times. Investing in such a comprehensive and adaptable plan ensures that you're protecting your family's future and also safeguarding your own well-being against unforeseen health challenges.