Is it required to get added critical illness cover alongside term insurance? Or is it just an extra expense? Term insurance and critical illness cover aim to protect you in different ways.
Term insurance pays money to the nominees when you pass away during the policy period. The cover helps them manage their expenses. Critical illness cover, on the other hand, pays you a lump sum if you are diagnosed with a serious illness. However, the policy must cover the illness.
In this article, we will explain what term insurance is and whether you really need critical illness cover too.
How Does Term Insurance Work?
Term life insurance offers a predetermined amount of cover. The tenure is for a set number of years.
For example, you can take Rs. 1 crore in cover for a 30-year term and pay a fixed premium each year. Your nominee will receive the full cover amount in case of your death during the term of the policy.
If you are alive when the term ends, you don’t get anything back, although a return of premium plan can change that for a higher price. That is why term plans are so affordable. The money can help your family with:
- Monthly bills and household costs
- Your home loan and other loans
- Your children’s school and college fees
- Your spouse’s needs in the years ahead
How Is Critical Illness Different From Term Insurance?
Falling ill and not passing away is the best possible news, but it also has its downside. A person who has a term plan and suffers a heart attack cannot work for several months. The hospital bills may also run into several lakh rupees.
In this case, the term life insurance plan doesn’t pay anything, because he’s alive. Meanwhile, the EMIs, rent and school fees keep coming. His family has to dip into savings and sometimes take a loan. This is the gap people often miss, and it’s exactly why illness cover exists.
Under a critical illness insurance, the policyholder gets a fixed amount of money when they are diagnosed with a serious illness. The cover can be used to pay for treatment for illnesses such as:
- Cancer
- Heart attack
- Stroke
- Kidney failure
- Major organ transplant
- Paralysis
People often get confused about two things when buying critical illness insurance cover.
First, there is a waiting period, typically 90 days from the start of the policy, during which any diagnosis is not covered.
Secondly, there is a survival period, typically 30 days, which means that you must still be alive 30 days after diagnosis in order to claim any money.
Term Plan vs Critical Illness Cover at a Glance
| Point | Term Plan | Critical Illness Cover |
| When it pays | When you pass away | When a listed illness is diagnosed |
| Who gets the money | Your nominee | You |
| Main purpose | Replace your income for your family | Cover treatment and lost income |
| Premium | Lower | Usually higher, and rises with age |
A health policy is different again. It pays your hospital bills, while illness cover gives you a fixed amount to use however you need.
When Should You Consider Getting A Critical Illness Cover?
When you are wondering if you should add a critical illness insurance cover, first ask yourself:
- You are the only or main earner in your home.
- There is a family history of cancer, heart disease or diabetes.
- You smoke, sit for long hours or have a stressful job.
- Your health policy cover is small, or you don’t have one.
- You’d like to lock in a lower premium while you’re healthy.
If you are young with no dependents yet, a good health policy may be enough for now.
Also Read: Choosing the Right Insurance Claims Adjuster in Los Angeles
Critical Illness Rider or A Separate Policy: Which One Do You Need?
To get financial assistance against critical illness, you can either get a rider or a standalone policy. Here is what to consider:
| Factor | Critical Illness Rider | Separate Critical Illness Policy |
| How it works | Added to an eligible life insurance policy | Purchased as an independent policy |
| Premium | Added to the base policy premium | Paid separately |
| Coverage | Depends on the rider’s terms | Depends on the standalone policy |
| Flexibility | Linked to the main policy | Has its own policy terms and conditions |
If you want additional coverage under your existing term life insurance, a rider is more practical. However, it can reduce the life cover.
On the other hand, a standalone policy gives you separate cover, meaning you will have to pay an additional premium.
Things to Consider Before Buying Critical Illness Cover
Don’t choose a cover based on how it is marketed. Here are some things that you must consider:
- Check the list of covered illnesses and the conditions against each one.
- Check what the waiting period is and if any illness is covered during this time.
- Read the conditions under the policy, as some policies also have a survival period. This requires you to survive for a specified number of days post-diagnosis.
- Existing illness and past treatments can affect eligibility, premium, as well as claims. Hence, disclose your medical history correctly.
- It is also important to check if the policy pays only once or pays for multiple claims. Read the exclusions carefully.
Summing It Up
You can have both types of insurance if your family depends on your income. Term insurance gives your family money if you are no longer around. Critical illness cover gives you money if you get a serious illness.
First, get term life insurance to protect your family. Then, consider adding critical illness insurance cover to your health insurance.
Disclaimer: The information mentioned above is general in nature. It is not tax or financial advice. Premiums, coverage and exclusions may vary from one provider to another. Read policy documents carefully and for more details about how term insurance works, visit the IRDAI website.