Build a security net, over and above the medical insurance that you have. But, do you really need this… read on.
“An open-heart surgery is required for Bhushan as there are multiple blocks”, the doctor was telling Seema, his wife. Tears welled up. Doctor was comforting her. “Don’t you worry. Medical Science has advanced so much that the risks in such a surgery is not that high any longer. Bhushan will be fine”, said the Doctor. Seema with tears still in her eyes asked, ”But, how much will it cost? “. Doctor replied that it may cost about Rs.3 Lakhs. Tears welled up again in Seema’s eyes. She knew that they have a medical insurance that covers them for Rs.2 Lakhs each. Now the surgery alone will cost Rs.3 Lakhs; and then there are the hospital charges, medicines… What she did not know was that Bhushan had taken a Critical illness cover and most of the expenses are going to be covered. Good news then! Seema however wants to know what this plan is all about and how this works.
Critical illness cover :
This is an insurance cover available against specified diseases/ conditions. Lumpsum payment based on the Sum Assured taken is made on diagnosis of the condition, irrespective of the amount spent or will be spent on illness. Such policies are available from both Life & General insurance companies.
Features & benefits :
• Benefit amount paid, over and above other medical policy claims as this is a defined benefit policy
• This is available as a separate product or as a rider in a life insurance policy. Depending on that, it may be a yearly renewable or a tenured contract.
• Will cover a specified number of illnesses – may be just 10 in some cases, especially riders and is over 30 in case of most standalone policies
• No maturity benefit is payable in these policies.
• There is a premium guarantee for a certain number of years, in most policies. Premiums can change post that, subject to IRDA approval.
• Premium varies widely. Indicative premium for a 40 year old can be between Rs.3000/- & Rs.8,500/- depending on the term, coverage & other benefits.
• Age at entry varies widely between product to product – 6 years or more, depending on the product chosen.
• Coverage term and age upto which covered ( 75 is the best I’ve seen in these policies ) also varies widely from policy to policy.
• Claim Payment made as per pre-decided payouts ( as a percentage of Sum Assured ). Many policies have a pre-defined list of illnesses for which they pay a certain percentage of Sum Assured - typically 50% to 100%
• Some policies limit the claim in case of a particular disease. After a payout is made for a disease, balance Sum Assured can be carried forward for other diseases – the premium is set accordingly lower in consonance with the balance Sum Assured.
• Claim can be done more than once, upto the Sum Assured. After that, the policy terminates.
• Some policies impose a survival condition of a certain number of days ( eg. 30 days ) for claim admittance.
• Waiting period for claims under this policy would be there in almost all cases – typically 3-6 months.
• Tax benefits available under Sec 80D or Sec 80C, according to the plan structure.
Analysis & deliberation
This policy is not a replacement for the Medical insurance policy. This cover needs to be taken to protect against the jolt like what Bhushan’s family would have received. However, the point to bear in mind is that this policy terminates once the sum assured is paid, unlike in a medical insurance policy, which I would rate as the most important limitation. Some policies allow you to carry the policy forward after settlement of a portion of the Sum Assured for the other covered diseases, for the balanced Sum Assured. This is a very useful option as atleast a portion of the cover is available for other illnesses. The other limitation is that the policy is only for a limited number of diseases/ conditions. In life, one may incur huge expenses in hospital bills for diseases other than those covered in the policy. Also, the number of diseases/ conditions covered by different policies is different. Also, this policy does not come very cheap especially considering it has limited applicability and can at best be an add-on policy.
Do you require it?
Insurance companies have come out with this product as there is a clear need for it. However, this is best taken in conjunction with a proper medical insurance plan – not in isolation as this a very focused, useful but limited plan. One should look at the family history, nature of work, station in life, ability / disability to absorb a jolt etc., before deciding on whether a Critical illness cover is required.
In the final analysis, one needs to take a view on the age upto which the cover is sought, diseases covered, special benefits in the policy, waiting period, survival condition imposed etc. apart from the premium before arriving on the final choice of the policy. If you can afford to put aside money for this, it is a good safety net to have.
A check on the claim history would be a good idea. You would not want to run around with IV needles still stuck to body parts, do you? Seema does not like that one bit and hopes like hell that the Critical illness policy of Bhushan pays. She is however wondering if a Surgical assistance policy would have been a better idea , as his friend Ajay suggested. She needs to wait till next week to know that!
published in DNA Money on 11/9/09
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