Critical Illness Insurance Plan: Should you buy?

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A Critical Illness Insurance Plan pays you a fixed amount (lumpsum) if you are diagnosed with a specified critical illness.

You have already bought a family floater health plan for Rs 20 lacs. That looks ok, right?

Well, your neighbour underwent cancer treatment last year. The treatment cost approximately Rs 30 lacs. You worry, if you were to contract a critical illness, your regular health plan won’t suffice. You will have to dip into your savings to fund the treatment. Therefore, you see a need to augment your health cover.

And a Critical Illness Insurance plan is one of the ways to augment your health cover.

Let’s find out more.

What is a Critical Illness plan?

A simple product.

  1. You buy a critical illness plan.
  2. If diagnosed with a specified critical illness, the insurer pays you a fixed amount (Sum Assured) and the policy terminates.
  3. You can use the amount for treatment or for any other purpose. No restriction on end-use of money.

With no restriction on end use, a critical illness plans can cover both hospitalization and non-hospitalization expenses and can also provide much needed cash flow during the recovery period. 

You have a lot of flexibility with the insurance money. For instance, you can go abroad for treatment. On the other hand, most health insurance plans would cover treatment in India only.

Besides, treatment of critical illnesses may require medication/therapies long after the hospitalization ends. A regular health insurance plan won’t be much use for such expenses. A critical illness plan will come in handy.

One way to think about this could be:

For hospitalization pertaining to non-critical ailments, your regular health cover will suffice.

For treatment of a complicated/critical illness, your critical illness plan would kick in.

Critical Illness Insurance Plan Vs. Health Insurance Plan

I list out the important differences in the table below. Will elaborate on these aspects later in the post.

Let’s find out more about Critical Illness plan, its benefits/limitations, and whether you should purchase such a plan. Before we go there, let’s look at the concept of Sum Insured and Sum Assured.

Sum Assured and Sum Insured

Notice the usage of terms. Sum Assured and Sum Insured. For defined benefit insurance products such as term plans, personal accident plans, and critical illness plans, Sum Assured is used. On the occurrence of insured event e.g., death in case of life insurance, the insurer pays a fixed amount (Sum Assured) to the policy holder or her nominee, as applicable. There is no link to expenses incurred or anything else.

Under indemnity plans, Sum Insured is used. You are compensated for loss or damage on occurrence of insured event. Non-life insurance products such as motor, health and home insurance are mostly indemnity products. The compensation from the insurance company is subject to the ceiling of Sum Insured. For instance, in health insurance plans, the insurer indemnifies (pays) the hospitalization costs.

At the end, it is just nomenclature. A few critical illness plans may use Sum Insured or Sum Assured. However, that does not change the nature of a critical illness plan. It remains a defined benefit product. Hence, Sum Assured is a more apt usage. In this post, I will use “Sum Assured” when I refer to Critical Illness plans.

Read: Which is the Best Life Insurance Company (2022)?

Important Things to know about a Critical Illness Plan

#1  A Defined benefit product (and not an indemnity product)

A critical illness insurance plan is a defined benefit policy. On diagnosis of a specified critical illness, the insurance company pays the fixed amount (Sum Assured) to the policy holder. And the policy terminates.

The payout has no linkage to the treatment cost. In fact, the amount is paid irrespective of whether she chooses to undergo the treatment or not. The policyholder can choose to use the amount as she wishes.

For instance, if the Sum Assured under the plan is Rs 10 lacs, on diagnosis of the critical illness, the insurance pays Rs 10 lacs to the policy holder and the policy terminates. Completely up to you how you want to use this insurance payout.

Contrast this with regular health insurance plans, which are indemnity products. The health insurance plan covers your hospitalization expenses, pre and post hospitalization expenses and certain specified day care procedures.

Under indemnity products, the insurance only compensates you for the actual expenses incurred subject to the ceiling of Sum Insured. For instance, if the Sum Insured is Rs 10 lacs and your hospitalization bill is Rs 4 lacs,the insurance company will pay only Rs 4 lacs and the policy continues. For the remainder of the policy year, you can make a further claim of Rs 6 lacs. At the start of the next policy year, the coverage limit will reset to Rs 10 lacs.

No concept of coverage reset in Critical Illness plans.

#2 Lifelong Renewability and Termination on payment of Sum Assured

As per IRDA regulations, all critical illness plans provide lifelong renewability. However, “lifelong renewability” has slightly different connotation in critical illness plans.

Lifelong renewal unless you are diagnosed with an insured critical illness.

Since the critical illness plan is a defined benefit plan (just like a term insurance plan), the insurance company pays the Sum Assured on diagnosis of a critical illness (insured event) and the plan terminates. Makes sense too. Under defined benefit plans, the insurance companies won’t pay more than the Sum Assured. And once the Sum Assured has been paid, there is no point of insurance.

If you want to continue Critical Illness cover, you must buy a new plan. A new plan (from same or different insurer) means fresh underwriting. Since you have been diagnosed with a critical illness, your chances of getting are bleak. Even if you can get one, you will have to cough up a very high premium.

Regular health insurance plans do not terminate after a claim. And the coverage limit (Sum Insured) resets at the start of each policy year. You can keep making claims for the same illness/disease year after year. Besides, since claims-based loading is not permitted,  the insurer can’t increase your annual premium just because you made a claim under the plan.

#3 Survival Period Clause

A policy holder needs to survive for a period of at least 15/30 days after diagnosis of critical illness before she can make the claim. So, if the policy holder dies 10 days after the diagnosis of a critical illness, insurance company will not pay anything. This is beyond me. I couldn’t really understand the rationale behind such a clause. If you have an answer, please leave a comment.

In fact, the same critical illness plan may have different survival period for different illnesses. IRDA regulations don’t prevent this.

Regular health insurance plans have no concept of Survival period.

Regular health insurance plans have waiting periods (2-4 years) for pre-existing illnesses and certain specified treatments. Critical illness plans have waiting periods too (much shorter though. Only a few months).

#4 Which Critical Illnesses are covered?

The number of critical illnesses covered will vary across plans.

A good part is that IRDA has standardized the definitions of 22 critical illnesses through its circular dated July 29, 2016. Therefore, you will find the definitions of the following critical illnesses exactly the same across insurers.

  1. Cancer of specified severity
  2. Myocardial Infarction
  3. Open Chest CABG
  4. Open Heart Replacement or repair of heart valves
  5. Coma of specified severity
  6. Kidney failure requiring regular dialysis
  7. Stroke resulting in permanent symptoms
  8. Major organ/bone marrow transplant
  9. Permanent Paralysis of Limbs
  10. Motor Neuron disease with Permanent Symptoms
  11. Multiple Sclerosis with persisting symptoms
  12. Angioplasty
  13. Benign Brain Tumor
  14. Blindness
  15. Deafness
  16. End stage lung failure
  17. End stage liver failure
  18. Loss of speech
  19. Loss of limbs
  20. Major head Trauma
  21. Primary (Idiopathic) Pulmonary Hypertension
  22. Third degree burns

A Critical Illness insurance plan can choose how many critical illnesses it covers. For instance, a CI plan can cover 10 out of the above critical illnesses. It can cover additional illnesses (not in the list) too. However, if it covers any of the above critical illnesses, the definition/severity of the critical illness must be copied verbatim from IRDA regulations.

I copy definition of 2 critical illnesses below.

Kidney Failure Requiring Regular Dialysis

End Stage Renal Failure presenting as chronic irreversible failure of both kidneys to function, as a result of which either regular renal dialysis (haemodialysis or peritoneal dialysis) is instituted or renal transplant is carried out. Diagnosis has to be confirmed by a specialist Medical Practitioner

MYOCARDIAL INFARCTION (First Heart Attack of specific severity)

The first occurrence of heart attack or myocardial infarction, which means the death of a portion of the heart muscle as a result of inadequate blood supply to the relevant area. The diagnosis for Myocardial Infarction should be evidenced by all of the following criteria:

  1. A history of typical clinical symptoms consistent with the diagnosis of acute myocardial infarction (For e.g., typical chest pain)
  2. New characteristic electrocardiogram changes
  3. Elevation of infarction specific enzymes, Troponins or other specific biochemical markers.

The following are excluded:

  1. Other acute Coronary Syndromes
  2. Any type of angina pectoris
  3. A rise in cardiac biomarkers or Troponin T or I in absence of overt ischemic heart disease OR following an intra-arterial cardiac procedure

Please note this is the standard definition (no matter how confusing) of kidney failure or heart attack as per IRDA guidelines. You will find the same definition of kidney failure in all the critical illness policies.

Now, I don’t know what these wordings mean. Only a doctor can explain. These narrow definitions (or so I believe) can be a source of dispute at the time of claim. What you (or your doctor ) feels is a kidney failure or a heart attack may not be kidney failure (or a heart attack) as per the insurance company.  There is severity attached to every condition. And this can cause a lot of confusion and makes critical illness plans less reliable.

To be fair to insurance companies, they must define the insured events objectively to underwrite the risk properly. Ambiguous definitions will also lead to unnecessary claim disputes. However, if you plan to purchase a critical illness cover, this is something you should be aware of.

A point to note: If these conditions are so severe that you require hospitalization, your regular health cover will anyways cover the expenses.

#5 Sub-Limits

A few critical Illness policies may have sub-limits for each critical illness. They pay only such amount (sub-limit) on diagnosis of the illness and the company’s liability in the future goes down by such amount. The policy ceases if the entire base Sum Assured has been paid. For instance, total cover is Rs 20 lacs and there is sub-limit of Rs 5 lacs for kidney failure. On diagnosis of kidney failure, the insurer will pay Rs 5 lacs and the company’s liability towards all the future claims will reduce to Rs 15 lacs.

How much does a Critical Illness Plan cost?

The premium will depend on your age and the number of critical illnesses covered under the plan.

Given the narrow scope of coverage and the defined benefit nature, do not expect premium to be very high.

I list the premium for Rs 10 lacs cover for a 35-year-old male.

Have picked the plans randomly (I could find the premiums about these plans easily). Please note that the premium can change each year or after a fixed number of years.

Cancer and Cardiac Care Plans

Now, the insurers have launched disease specific products too, primarily to cover cancer and cardiac issues.

For instance, you can have a plan that covers only 1 critical illness, say cancer. Or cardiac conditions. Therefore, if you foresee the risk of a particular illness to be high (and such a plan exists), you can buy that plan.

Plus, the insurer could structure the product that has both defined benefit and indemnity benefits. Say, pays a lumpsum on diagnosis and reimburses/pays hospitalization bills too.

Enhanced health cover vs. Critical Illness Insurance plan

You considered buying a critical illness health insurance plan because you were worried that your regular health plan won’t be able to meet the treatment expenses of a critical illness.

What about enhancing your health cover?

After all, a regular health insurance plan offers a much wider coverage than a Critical Illness plan. I have picked up plans from two insurance companies. You can see there is not much difference in terms of premium for

  1. Separate health cover (10 lacs) and Critical Illness Plan (Rs 10 lacs)
  2. Health cover of Rs 20 lacs

Easy to note that marginal cost of health is not very high. For insurance, to double the cover from 10 lacs to 20 lacs, you just must pay only 25-30% more.

Premium-wise, there is not much difference (Higher health cover Vs. Lower Health cover + Critical illness plan).

Therefore, the decision must be based around preferred way of coverage.

Should you buy a Critical Illness Insurance plan?

I have a strong opinion on many insurance matters. For example, don’t buy traditional life insurance plans. Purchase a pure term cover to meet your life insurance needs.

However, in this case, I do not have a black and white answer.

A critical illness plan has many merits. Given the defined benefit nature of product, you can use the money whichever way you want. You can even go abroad for treatment that most regular health plans won’t cover. You can use it for non-hospitalization expenses too (that regular health plans won’t cover).

If you have a family history of any critical illness (there is a genetic disposition to the illness), it makes sense to spend some money to guard against that illness.  And yes, do make full disclosures while purchasing the policy.

At the same time, there are several limitations too due to restrictive nature of definition of various illnesses and the survival period clause. However, the biggest drawback is that a critical illness policy ceases once the company pays Sum Assured on diagnosis of a critical illness. Regular health plans continue as long as you keep paying the premium (irrespective of whether you make a claim or not). Hospitalization for all the critical illness will likely be covered under your regular health plan.

Consider these aspects.

  1. A Critical Illness Insurance plan will pay just once. What will you do after that? A Health insurance plan can pay multiple times. The coverage under health insurance plans also reset every year.
  2. You need critical illness insurance plan to fund the expenses for treatment of a major illness. A health insurance plan will cover most of those expenses too.
  3. If you are worried about the treatment cost of major illnesses, you can consider a bigger health insurance cover. Instead of Rs 10 lacs health cover + 20 lacs Critical illness plan, you can simply buy a health cover of Rs 30 lacs. The marginal cost of health insurance is low. Hence, a Rs 30 lacs cover won’t be thrice as expensive as a Rs 10 lacs cover.  Alternatively, you can consider a super top-up plan.
  4. A CI plans covers you for only specified ailments. Associated severity can make things quite complicated. A regular health insurance plans provides a much more exhaustive coverage and has much simpler criteria.

What should you do?

You have a many options:

  1. Continue with the existing health cover. Do not purchase a fresh critical illness plan.
  2. Continue with the existing health insurance plan and purchase a fresh critical Illness Plan.
  3. Do not purchase a Critical Illness plan. Go for an even higher health cover; say Sum Insured of Rs 20 lacs in place of Rs 10 lacs. You will have to shell out additional premium. We have already seen there is not much difference between enhancing your Sum Assured. Ensures much wider coverage. This option is essentially an extension of option (1).
  4. Go for a super top up health cover over your existing health cover.
  5. Purchase adequate health cover. Instead of buying a critical illness plan, keep adding to a medical emergency fund. Do not touch the corpus except in the event of a medical emergency.

No wrong answer here. The idea is that you must have adequate health cover. Adequate is a subjective term. If you some have idea about health care expenses in your city, cost of surgical procedures etc, you can arrive at a number. On a lighter note, if God goes after you, nothing is ever going to be adequate.

If you ask me, I will go with (3), (4) or (5). Which option would you go with?

A Critical Illness plan is not a substitute for health insurance plan. You can use it only to augment your health insurance cover. Therefore, irrespective of whether you opt for a critical illness plan, you must have adequate health insurance.

Critical Illness Insurance Rider or a Standalone Insurance Plan?

You can also buy critical illness rider with the regular life/health insurance plans for extra premium. A rider can be cheaper than a standalone plan since there are lesser administration costs. Both approaches work in a similar way. There are a few minor differences.

Under a rider, the cover may be linked to the Sum Assured/Sum Insured under the base plan. Under a separate plan, you will have flexibility to choose cover.

Under a rider, your rider will automatically get renewed when you renew the base plan. In case of a standalone plan, you will have to renew the base plan every year.

As far as premium is concerned, premium for the separate plan can change every year. This can also happen if you buy a rider with your health insurance plan.

A point to note if you are buying critical illness rider with your term insurance plan. Do check if the rider offers accelerated benefit or additional benefit. Let’s say you have a term cover of 1 crore and a critical illness rider is Rs 20 lacs.

If the critical illness rider has accelerated benefit, the life insurance cover will go down to Rs 80 lacs once the CI benefit is paid.

If the CI rider offers additional benefit, the life cover stays at Rs 1 crore even after payment of Rs 20 lacs under CI rider.

Between rider and a separate plan, a separate critical illness insurance plan gives greater flexibility.

Additional Links

HDFC Ergo Critical Illness Plans

Niva Bupa Critical Illness Insurance Plans

64 thoughts on “Critical Illness Insurance Plan: Should you buy?”

  1. Hi Deepesh,
    Thanks for the excellent article. I also got a lot of value from your personal accident insurance plan article which helped in making more informed insurance planning decisions.

    Related to critical illness article above, I had a couple of questions. What are your thoughts about super top up plan (option 4 in your article above)? I was thinking super top up plan premium (option 4) might end up being cheaper relatively than extending the base health plan itself (option 3)? Any thoughts you may wish to share around comparing / pros&cons between these 2 options? Thanks!

    1. Thanks Shankar!!!
      Am glad you found the articles useful
      If I can afford, I would rather purchase adequate health cover in a regular plan. Personally, I do not like the idea of having to claim from two different policies. Will only add to the hassles.
      I assume you are talking about super top-up plans (and not top-up plans).
      If you are planning to purchase a super top-up plan over and above employer health plan, then it may make sense to purchase a super top-up plan. Some insurers even allow you to convert the super top-up plan to regular plan. Waiting periods will also be counted during conversion.
      Btw, you do not need to have a regular health insurance plan (employer health insurance) to purchase a super top-up plan.
      If you are planning to purchase a super top up plan over and above a private health plan, I see no reason Super top up plans (over and above regular health plan) may be a cheaper option for you. Say, you purchase a regular plan of Rs 5 lacs and a super top-up plan of Rs 10 lacs (with exactly the same coverage features as regular plan) with deductible of Rs 5 lacs from the same insurance company.
      The company is essentially giving you coverage of Rs 15 lacs (Rs 5 lacs under regular plan and Rs 10 lacs under super top-up plan). So, I see no reason why you would get cheaper coverage under a mix of regular and super top-up plan (than a regular plan of Rs 15 lacs). The risk of payout for the insurance company is the same. Why would they sell the combination cheaper? The two plans are only adding to the operational costs for the insurance company.
      Apollo Munich Optima Restore Insurance Plan (for sum Insured of Rs 15 lacs) costs Rs 11,820. On the other hand, Optima Restore for Rs 5 lacs costs Rs 7,404 and Optima Super (Sum Insured of Rs 10 lacs with deductible of Rs 5 lacs) costs Rs 2,822. That’s a total of Rs 10,226. So, the difference is not so much. And we have not yet gone into difference in features between regular and super top up plan.
      The combination can be cheaper if the super top-up plan provides lesser features as compared to regular health plan. You need to check if the plan provides the same features (coverage) as your regular plan. If your regular plan has no sub-limits while your super top up plan has sub-limits on say room rent, you may have to switch to a shared room or pay the difference from your pocket. So, if you are comfortable with a slightly less loaded super top-up plan, then you might be able to save money. You have to make a decision on this front.
      Additionally, super top-up, due to their inherent structure, are less likely to be cashless plans. You will have to file for reimbursement. More hassles for you.
      I am planning to do a post on super top up plans soon. Perhaps, would be able to provide more precise inputs after thorough research.

  2. Hi Deepesh,

    It was a fantastic read and very relevant for me as I am researching before opting for one/combination policy.

    I have 3 as. Please help me understand those –

    1. It is very clear to me now the difference between defined benefit and indemnity cover. But in terms of coverage of disease, is there any difference between option #2 and option #3? So in a scenario like –

    – having diagnosed with cancer
    – having an existing policy of 20 Lakh
    – not having any separate critical illness cover
    – not having any rider in his existing policy for critical illness

    Does he get indemnified for treatment for cancer?

    2. Related to option #4, I have another qs. Say I have an existing policy of 10 Lakh and on top of that I take a Super Top Up policy of 10 Lakh with threshold = 10 Lakh. So effectively I have 20 Lakh cover. But I do not opt for critical illness rider in neither of the 2 policies. Now I get diagnosed with cancer and treatment cost comes to be 15 Lakh. Will I get 10 + 5 coverage from 2 policies? Or I get nothing from both as Critical illness is excluded in both?

    3. I am curious to know how Claims are settled in a cashless scenario for option #4? Say both offers cashless facility in that hospital. So when coverage amount of base policy is about to get exhausted, does the base policy insurer settles with the super top up policy insurer? Or as a policy holder, I only have to coordinate the whole process?

    Will await your response. Tx. Shameek.

    1. Hi Shameek,
      Am glad you found the article useful.
      1. Regular health insurance covers you for all kinds of hospitalization including cancer and other critical illnesses. Critical illness covers you for specific illnesses. Payment is typically made on diagnosis. There is minor difference between 2 and 3. If the total expense is Rs 20 lacs, it will be same. If the total expense is Rs 15 lacs, your indemnity cover will reimburse only 15 lacs. On the other hand, under the combination, you will get Rs 10 lacs under critical illness plan and you can claim Rs 10 lacs under regular health plans. So, the total payout from the insurance companies combined will be Rs 20 lacs. Having said that, you don’t purchase health insurance to profit.
      2. Yes, you will be reimbursed entire Rs 15 lacs. First 10 lacs from regular plan and remaining Rs 5 lacs from super top up plan. See, hospitalization for critical illness is covered regular plans too. You will most likely take cancer treatment after getting admitted into a hospital. Chemotherapy etc is covered under all the plans I have seen. Apart from hospitalization, day care procedures are also covered under most plans. Please note the number of day care procedures covered varies across plans.
      3. Super top up plans, due to their inherent structure, will most likely be reimbursement plans. Not likely to be cashless plans. So, you will have to co-ordinate. Cashless may be possible if you have regular and super top plans from the same insurance company. Please refer to my earlier comment on the super top up plans in this post. If you are purchasing the regular and super top up plan from the same company, then risk to the insurance is same. To the company, it does not really matter if you have regular and super top up plan of Rs 10 lacs each or a regular plan of Rs 20 lacs. They will have to cover your treatment up to Rs 20 lacs. Hence, the premium should not be much different (unless the regular and super top plan differ on features). Perhaps, I am missing something. I am planning to do a post on super top up plans soon. Will be able to offer better insights in that post.
      Let me know if you need further clarification.

  3. This is eye-opening and unbiased state of affairs. I have been looking at multiple popular blogs and articles to get a better understanding of taking insurance for my needs. Your blog is the only place where I found true and unbiased analysis. Specifically, the article on critical illness cover is clearly written to see it from a neutral and evaluation viewpoint where interest of the insurance purchaser is looked at. Other popular blogs seem to suggest something quite blindly – there may or may not be commercial bias there.

  4. Hi Deepesh,
    I find your articles very informative and the best part is not biased to any particular product.

    I have a National insurance mediclaim policy of coverage 3 Lacs each. It covers my Dad(71 yrs), Mom (65 Yrs), self(38), Wife(35),daughter(7) and son(5). I am paying a premium of approx 33K.

    I want to increase the cover to 10lacs and make it as family floater. I inquired with the concerned person and he tells me premium will be approximately 85 K.

    Kindly suggest, What to do?

    Regds

    Devesh

    1. Dear Devesh,
      Am glad you have found the articles useful.
      The premium for family floater depends on age of the eldest member. Since your father’s age is 71, the premium for the entire family has shot up.
      Would suggest you purchase a family floater for self, spouse and the two children.
      Purchase individual policies for your father and mother. If possible, pick up co-payment or deductible clause to reduce the premium for parents.
      Overall premium should be less.
      Check this with the insurer and let me know if the overall premium comes down.
      Btw, you mentioned Rs 3 lacs each. Does you mean you have six policies of Rs 3 lacs each?
      There is a post on my website about individual and family floater plans.
      http://www.personalfinanceplan.in/insurance/individual-health-insurance-vs-family-floater/

  5. abhayabrahma@gmail.com

    Hi Deepesh, ypu would want to check this…..IPRU just launched iprotect smart which is a life insurance with critical illness cover!

  6. This is a fantastic article. I was looking for similar analysis. My personal opinion too is for #3 and #5. Your analysis has further strengthened my opinion.

    Thanks,
    Muni

  7. DeepeshJi
    Excellent article.Insurance companies are having very narrow definition of critical illness. As per severity conditions, critical illness is next to death!
    The premium is increasing exponentially after the age of 60-65 years where one need this insurance most.After 65 years, most of the companies are charging annual premium more than 30% of sum assured! which makes them nonviable (to individuals). More over as per policy document, Doctor appointed by the company should be convinced about the stage of illness. Surely, they will put forward “n” number of reasons for not getting convinced! I have analysed premia and other aspects of many policies. With 10% return,the sum assured will be reaching in 15-16 years.Hence for younger generation better to have emergency fund instead of Critical Illness policy. I have increased my Health insurance and started one additional SIP for medical emergency fund.
    with regards
    Satheesh Rao

    1. Thanks Satheesh. Am really glad you liked the post.
      Really useful insights.Thanks!!
      Yes, whenever there is an element of subjectivity, insurers can really cause problems.
      For the elderly, health insurance is quite expensive. It is better to opt for co-payment option or purchase a super top-up plan to limit cost of hospitalization .
      Personally, I have nothing against critical illness plans. However, I prefer an enhanced Sum Insured and an additional medical corpus.
      Yes, that is a wise approach.

  8. Hello Deepesh

    I am 24 yr old and want a term plan pf 50 lakhs. I am confused to take critical illness rider along with it or not.

    Also I want advice on which term & Critical illness (rider) should be taken from the 2 options that I searched.
    1. ICICI pru smart along with critical Illness benefit (Max 30 yrs)
    2. HDFC CLick to protect with critical Illness benefit (Max 40 yrs)

    Can you please guide me on this. As of now I have no mediclaim insurance of my own.

    1. Deepesh Raghaw

      Hi Vandit,

      First, you should purchase a regular health cover. Critical illness plan is secondary.
      Purchase adequate life cover.
      If you want to take a critical illness cover, would suggest you take as a separate plan. There are standalone critical illness covers available too.
      An additional point to note is that don’t opt for a plan where critical illness plan is an accelerated rider. That means if life cover is 50 lacs and critical illness cover is 10 lacs, After payment on critical illness diagnosis, the life cover goes down by 10 lacs.

      I have not really looked into these plans. So, am not in a position to make a choice for you. Check for aspects I discussed above and make a decision.
      I have a term plan from HDFC Life and I am pretty disappointed with their service. Can’t change the insurance company for some reason.
      Cannot comment about ICICI Pru. All I know is that HDFC Life service is pathetic. So, if you have to choose between these two (and everything else being the same), go with ICICI Pru.
      Think you should check out Max Life too.

      My suggestion: Purchase adequate health cover. Purchase adequate life cover. If you want greater protection, purchase a standalone critical illness plan.
      Hope the answer helps.

      1. Hello Deepesh,

        I am in process of comparing & getting a regular health insurance.

        For Critical Insurance I have following observation:

        1. For standalone critical illness cover the premium increases with age but for rider it will remain same for all the term.

        2. For ICICI iProtect policy critical rider is accelerated rider but not sure of HDFC Click to Protect.

        3. ICICI is giving me critical Insurance for 30 yrs term but for
        HDFC the term is 40 yrs

        4. ICICI is giving critical Illness for 34 diseases while HDFC is giving Critical Illness for 19 diseases.

        As you have mentioned that HDFC Life service is pathetic & should check Max life but they don’t have a critical Insurance rider with them.

        Please advice

        Thanks
        Vandit Jain

        1. Deepesh Raghaw

          Dear Vandit,
          The issue with financial decisions is that there is rarely a crisp answer.
          I can only facilitate decision making. You must make decisions yourself.
          About the cost, you will pay more in initial years with term plan rider.Standalone Critical illness plans will get expensive during the later years. You can do present cost analysis to find out if you are paying in more one case. Do not jump to conclusion straightaway.
          Also, notice the extent of coverage under rider and standalone plans. Read the policy wordings. Try to compare. That’s how you will learn.
          To be honest, I don’t think a couple of thousands of excess premium probably won’t impact your finances badly. The greater priority should be getting right kind and right amount of coverage.
          If you want me to assist you professionally, please visit the Offerings Section.

  9. My age 36 i have 1 health insurance 5 Lakhs with family floater and 3 critical illness plan difference company Max bupa 10L,Bharat axa 5L and one more max bupa 10L Total 25 lakhs my health condition B.P and overweight i apply multiple claim health insurance or etc try to compare

    1. Deepesh Raghaw

      Dear Feroz,
      Your question is not very clear.
      As you develop illnesses, it may get difficult to purchase health insurance.

      1. 1.how many time sum assured critical illnesses my income 5 p.a

        2.Already 25 Lakhs this plan one more company critical illnesses apply any problem?

        3.Already health insurance 5 lakhs ok or more sum assured?

  10. This article is really useful. Thanks for that Deepesh.
    I will go for the Super Top Up option.
    I have Health Insurance plan with 4 lacs coverage and so I would be going for ICICI Lombard Health Care Plus with SA of 10 lakhs and deductible of 4 lakhs. Also the Insurance company providing the corporate insurance gives an option of converting to non-corporate policy on resignation with continuing benefits.
    I was about to go for a critical illness policy but after I went over this article I decided on this option.
    Thanks again.

    1. Deepesh Raghaw

      Hi Vishal,
      IF you are young, do not complicate matters.
      Go for a large regular cover (rather than two covers…a small regular cover and a super top-up).
      Claiming from two plans is not without hassles.
      Portability from employer cover to personal cover is allowed. However, the insurance company at the time of porting does fresh underwriting exercise and may even decline to issue the cover. Keep this aspect in mind.

  11. This is the best article on medical insurance i have read so far. Reading the article and then your reply to the queries has cleared all of my doubts. Nice work.

  12. Deepesh, Thanks for this article.

    I was also looking for an option to buy CI plan of SA around 10 Lakhs and was going through many articles. This article provides great insights. I am currently 32 and have Max Bupa Health Cover (Family Floater) of Rs 30 Lakhs SA.

    My personal thoughts on this are: this plan is helpful only if the mentioned critical illnesses occur in early years say like upto 45, wherein the emergency fund for medical might be inadequate. Post this age, if the emergency funds (say equivalent to premium amount) is partially invested in MFs and in FDs, these may be giving higher returns than SA mentioned. Thinking of taking a minimal cover with only 2k-3k premium.

    1. You are welcome, Nitesh.
      I never had a black and white answer for critical illness plans.
      You have a very decent health cover. Should suffice unless the God really goes after you.
      I think a bit differently. Your health insurance cover already covers the expenses for treatment of that critical illness.
      However, I understand a few illnesses can shoot up the medical bill, which a regular health plan may not be able to cover. That’s where critical illness cover can come in handy as a low cost option.
      Yes, once you have accumulated a decent medical corpus, the need for the critical illness cover may go down.
      In your case, you seem to sufficient health cover. Don’t think there is any need. However, if you wish, you can go for a small critical illness cover.
      I write my posts keeping affordability in mind. If affordability is not an issue, go for it.

      1. Thanks Deepesh for the insights…what I meant actually was that while Health Insurance plan covers for all illnesses, what pinches you is may be a loss of earnings/job during that treatment and afterwards while EMIs still have to be paid…So CI plan will come to rescue during that part..

        Anyhow, Decided to drop buying CI for now…may think about it in future..

        1. Deepesh Raghaw

          H Nitesh,
          I agree with you to an extent. A prolonged hospitalization does not just result in heavy medical bills but you may have to compromise with your income too. This is especially true for self-employed. I agree that a critical illness plan can come in handy in such cases.
          However, as an adviser, I believe there are other ways to provide for such contingencies in your investment portfolio. For instance, you can have an adequate emergency corpus and medical fund.
          But, as I said before, the answer is not black or white.
          Pick up the strategy that lets you sleep well at night.

  13. Hi Deepesh,
    It is very informative. I am considering to take Critical illness plan. I have a employer based Health cover and have personal health cover as back up up to 5Lakhs. But, would like to know if claim can be done multiple times in case of stand alone CI policy & term policy rider?With Term insurance rider, critical illness premium will not increase ,but in case of stand alone, it will increase with age disregard whether u claim or not..Pls suggest best stand alone CI policy from your analysis…

    Raju

    1. Deepesh Raghaw

      Thanks Raju. Glad you liked the post.
      Health insurance plans are indemnity plans i.e. your medical expenses are reimbursed/settled by the plan. Hence, if you have multiple health insurance plans, you cannot claim more than what you have spent from all the plans combined.
      Critical illness plans are defined benefit plans. The payout from insurance company is not linked to your treatment expenses.
      Insurance company will pay on diagnosis of critical illness. You can choose to spend the money whichever you want.
      So, if you have 5 critical illness plans, you will receive payout from 5 plans.
      Yes, that is the case with critical illness riders with term plans. Premium is fixed for the policy term. However, I have given a an example where even the rider premium can change after a few years.
      With standalone plans, premium typically increases every year.
      Have not researched critical illness plans. So, can’t comment on which is the best plan. Moreover, it is difficult to compare because severity of every illness is defined which is difficult for lay person to comprehend and make judgement.

      1. Sorry for not framing question correctly,in case critical illness happened more than once,then can we claim multiple times from same insurer.

        1. Raju,
          Critical Illness plan is a defined benefit plan. The maximum during the policy term is capped at Sum Assured.
          Once you utilize the amount, the policy automatically lapses.
          For instance, you have critical illness plan of Rs 10 lacs. If you get diagnosed with a critical illness, the insurer pays Rs 10 lacs and the policy terminates.
          A critical illness plan is unlike regular health plan where the amount gets reset every year.

  14. Excellent article with the pros and cons. Very useful .Thanks for sharing.

    I need your help to review my insurance portfolio
    1)Health
    a)I have a family floater Health Insurance with Oriental Insurance for 5 Lakhs covering my Mom(66),self(36)/wife(32) and son (2)

    b) I have another family floater Health Insurance Apollo Optima Restore for 5 lakhs covering
    my self(36)/wife(32) and son (2)

    2) LIFE (term policies with no riders)
    I have pure term insurance with no Rider with ICICI term plan -50 lakhs.(upto 60 years)
    I was planning to buy another Term cover of 50 lakhs with ICICI . Two cober

    4) I was also looking for a stand alone critical illness Plan
    However ,after reading your article I’m confused between following choices

    a) To buy stand alone critical illness plan of 10 to 15 lakhs
    b) To top up my Apollo Optima Restore with another 10 lakhs
    c) To buy a ICICI term policy of 50 lakhs with critical illness rider (upto 75 years)

    Warm Regards,
    Vikrant

    1. Hi Vikrant,
      Thanks. Glad you liked the post.
      Please do share the post with friends and family.
      Adequacy of health cover depends on your city, your treatment preferences and family medical history.
      If you stay in a bigger city, treatment is likely to be expensive. Hence you need greater cover.
      If the members tend to get hospitalized more, then you need higher cover.
      Similarly, if you have preference to take treatment in single private rooms rather than sharing rooms, then the treatment cost will be higher.
      Btw, I am not saying Rs 10 lac cover is less. I have not checked Oriental Insurance plan. But in case of Apollo Munich Optima Restore plan, there is no-claim bonus of 50%, which is good for you.
      Since your mother is not covered under Apollo Munich plan, in case any of you, your spouse or son (God forbid) were to get hostpitalized, make a claim under Apollo Munich Optima restore first. This way, cover for your mother will be intact.
      2. Which term insurance plan are you talking about? Suggest you go through the following post and leave your questions/clarification in the comments section to that post.
      http://www.personalfinanceplan.in/insurance/which-is-the-best-term-insurance-plan-for-you/
      Do not get fixated with random numbers (Rs 50 lacs or Rs 1 crore). Calculate your life insurance requirement and purchase cover accordingly.
      4. Don’t get confused. Critical illness plans are not like Traditional life insurance plans which are strictly avoidable. I mentioned in the post I do not have black and white answer to this question.
      I keep affordability and utility aspect in mind when I write my posts.
      a) You can go for it.
      b) I ilke this option. However, I would rather increase cover under the same plan rather than go for a super top up plan. Again my preference.
      http://www.personalfinanceplan.in/insurance/top-up-and-super-top-up-health-insurance-plans/
      c) I don’t like this option because the rider may be accelerated. So, your life cover will go down if you make claim under critical illness rider. For better understanding of accelerated riders.
      http://www.personalfinanceplan.in/insurance/all-you-need-to-know-about-life-insurance-riders/
      I don’t know which term plan you are referring to. But with ICICI Pru Iprotect Smart Term plan, critical illness rider is an accelerated rider.

      1. shettyvikranth@gmail.com

        Thank you for your free tip.
        I have decided to go with (a) stand alone critical illness plan of 10 lakhs- Apollo Vital.

        Term plan – I was referring to the ICICI pru Samrt term plan and I agree with your point of view

        Once again thanks

  15. Dear Deepesh,

    Really your column is inquistive. In case if i enhance the cover instead of buying CI cover and assume i dont have to get hospitilise for a illness but i need to undergo day-care procedure. In that case i cannot claim under my regular mediclaim right because i did not get hospitalized.

    1. Hi Vivek,
      Many critical day-care procedures such as dialysis, chemotherapy etc are covered under almost all policies.
      In fact many more are covered.
      One more thing. I am not against Critical illness plans. Just that I have preference for a larger regular cover.

  16. I have a health insurance provided by company which covers self+spouse+father+Mother of 3Lacs.
    And my brother also having 2.5lacs coverage from some other company.

    My question whether I will be able make claim from both. for e.g if medical cost comes total around 4.5lac whether i can sum it from both ?

    And pls suggest whether i should buy another separate individual plan or a super top-up is enough?

  17. Amit ht25@rediffmail

    Is health insurance plan covers hospitalisation expenses for critical illness like cancer, heart attack,kidney failure or one should opt for critical illness man for health cover of 10 l.

  18. Amit ht25@rediffmail

    Is it worth to buy health insurance from private firms or one should go for govt one like national/oriental etal.

  19. Amit ht25@rediffmail

    Is it worth to buy insurance with room cap or without room cap.
    Is it worth to buy health insurance from appolomunich where wording says you will not be paid for more than once in a policy year in case of critical illness

  20. Quite an interesting article Deepesh.

    To give you a brief background about my insurance cover. I’ve an employer family health policy of Rs. 3 lakh, similarly my spouse has an employer family health policy of Rs. 3 lakh. Have a term cover of Rs. 1 cr for myself, will soon buy for my spouse as well.

    I’m in the market for the following insurance
    1. Accident Insurance – Have bought of Bajaj Allianz
    2. Critical Illness Cover- Pending
    3. Super Top up Policy – Pending
    4. Separate Individual health policy – Pendin

    I’m convinced by your logic that it is better to buy a larger cover of basic medical insurance rather than separate Critical Illness cover and Super top up policy.

    However still want to ask you once again – is there no great benefit of buying a separate Critical Illness?

    One thing which I can think of – say one suffers from a first heart attack of specified severity at that time critical illness policy will pay out the sum assured. In case of basic medical insurance only the hospitalization expenses, pre and post hospitalization will get covered.

    Is there any other major benefit that you see for Critical Illness?

    Regards,
    Ravi

    1. Deepesh Raghaw

      Thanks Ravi!!!
      Will really appreciate if you could share the post with your friends.
      There is very clear benefit of purchasing a critical illness plan. No two ways about it.
      You are right. In the case you mentioned, critical illness will be very useful.
      The problem is that there is cost involved. Should you bear the cost?
      Health insurance will bear a bulk of cost too.
      Moreover, severity is subjective. Additionally, CI plan is a fixed benefit plan. The plan gets over once the benefit is paid. The coverage does not reset after 1 year.
      As mentioned in the post, I do not have a black and white answer to this question.
      No other benefit apart from those mentioned in the post.

      1. Thank you for your response Deepesh.

        Another query – Can you please share your feedback about following Insurance companies

        I’m considering Critical Illness policy of these three companies, 25 lakh cover for my wife
        1. Max Bupa – 20 illnesses covered, premium around 8000
        2. Cigna TTK – 30 illnesses covered, premium around 10000
        3. Aviva – 12 illnesses covered, premium around 5841

        In case of Cigna TTK, premium gets revised every year, so premium will be around
        Rs. 80,000 at age 60,
        Rs. 170,000 at age 70
        Rs. 278000 at age 80

        So I don’t think it makes sense to go for Cigna TTK, might as well create a corpus of 25 lakh by investing money in a mutual fund.

        Not sure about Max Bupa and Aviva, how they will be increasing the premium. Will have to check on that.

        1. Deepesh Raghaw

          I do not have opinion about specific companies.
          Critical illness plans are fixed benefit plans (the limits do not reset). if the premium is too large, it makes sense to contribute to medical emergency corpus.

      2. Dear Deepesh,

        Regarding critical illness, I spoke to Max Bupa as well and they said that the premium every year will increase by around 1% every year, however they do not have anything in writing. If it is increasing by only 1% every year. then premium will not be as high as Cigna TTK.
        Rs. 10,800 at age 60
        Rs. 12,000 at age 70
        Rs. 13200 at age 80.

        But they do not have this in writing.

        1. Deepesh Raghaw

          Hi Ravi,
          Unlike term life insurance plans, the premium for critical illness plans is not fixed.
          The insurance company can always revise the premium based on underwriting experience.
          It does not matter what they say or if they give you in writing.
          The insurance contract allows revision of pricing.
          Even the companies which have fixed premium for a range band can revise premium if they have adverse underwriting experience.
          Sales teams do not know much.

  21. Bindu khurana

    Hi Deepesh very useful article.well researched.Thanks for answering all queries. I want to know if u have investment related ideas then pls do share them also.

  22. Zubin Baisiwala

    Hi
    Great article!
    I am 32 and unmarried.
    Need one quick advice:
    I already got following policy:
    1. Health Insurance: United india insurance- 10 lakh cover with 5lakh super top up. So I have cover of 15 Lakh and paying premium of 8,500
    2. LIFE INSURANCE: Asha Deep – II (Plan-121)- I have cover of 5 lakh- a) Cancer (malignant), b) Paralytic stroke leading to permanent disability c) Failure of both kidneys and d) heart disease leading to bye-pass surgery, 50% of SA is paid immediately, further premiums are waived and 10% of SA is paid every year thereafter. If no claim then I get back money along with bonuses. I am paying around 19,000 premium
    3. Dengue Policy- Apollo Munich for 1 lakh coverage. For around 700 bucks

    I am planning following:
    1. Increase Health insurance by 5 lakh more with united India. So my coverage would be 20 lakh. Will that suffice?
    2. Buy one term insurance for 1 crore cover to start with. Should I split this in to 50 lakh each for two companies to play safe? I am thinking about Tata and Aegon? or Tata and LIC?
    3. I already got critical plan with LIC for 5 lakh. So does it make sense to take separate critical illness plan? If yes, will 20 lakh cover suffice? I am thinking about max bupa or Apollo vital? What is your suggestion and which one? Max bupa covers 20 illness vs Apollo 37 illness. Premium wise Apollo is expensive and max bupa offers same coverage for 3/4th cost.

    Your help in above would be highly appreciated.

  23. Hello Deepeshji,
    Thanks for nice informative article.
    I would like to seek your advice on converting Mediclaim personal to Group plan.
    My Age is 60. I have New India Mediclaim for 3 lacs and for My wife 3 lacs (Age 57 Years). New India has increased premium almost 50% higher. I am planning to purchase Rs. 7 lacs Mediclaim thru New India Canara Bank Group policy. for 30% cost only.. My concern is whether I will get continuation benefit from New India Assurance as I am not porting company but only plan/agent.

  24. I Have Critical Illness policy of these three companies, 25 lakh cover for me and wife
    1. Max Bupa – 20 illnesses covered
    2. Apollo munich – 36 illnesses covered,
    3. Aviva – Heart care

    In case any 1 claim Heart attack surgeries i apply 3 company claim full amount 25 lakhs ?

    1. Hi Firoz,
      All the companies will have to pay. Critical illness plans are not indemnity plans. These are fixed benefit plans (just like term insurance).

      1. In-case next year any claim surgery 10 lakhs amount treatment cost i am apply 3 company in max bupa payout 10 lakhs + apollo – 5 lakhs + aviva + 10 lakhs = 25 lakhs my hospital cost only 10 lakhs but benefit payout 25 lakhs correct or not ? extra 15 lakhs profit

        1. Hi Feroz,
          Critical illness plans are fixed benefit plans (like term life insurance).
          The insurance company pays irrespective of the treatment cost.
          Additionally, please note the critical illness plan automatically lapses once the company pays the entire amount.
          you won’t be able to renew it (unlike health insurance).

  25. Good Article. But i still believe health insurance and Critical insurance are two different entities. I strongly agree that one should have adequate health insurance to pay big hospital bills but i look at CI as a substitute to loss of income which will arise out of CI. Generally in private sector usually we get only 3 months of paid sick leave but any illness with high severity Recovery may take more than 3 months in this case how to handle the loss of salary income? It is not just about going on loss of pay leave but if you happen to be on leave for more than 5-6 months you may loose job. Then what to do?

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