The health insurance industry has undergone an innovative revolution in terms of the products being offered. While earlier there were the only indemnity based health plans which paid for the actual hospitalization costs, today, there is no shortage of plans. There is the popular indemnity based health plans, disease-specific plans, senior citizen health plans, supplementary plans like top-up and super top-up and fixed-benefit plans like critical illness and hospital cash plan. Among all these varieties, one is spoilt for choice. With health ailments rising and medical costs becoming unaffordable, these plans also find their relevance. Take the instance of a critical illness plan itself. The plan, with its coverage benefits, is very beneficial for individuals. Let’s explore how –
What are critical illness plans?
Critical illness plans are a type of health insurance plan which covers a list of specified critical illnesses and critical surgical treatments. If the insured is diagnosed with any of the covered illness or if the insured undergoes any of the specified treatments, the plan pays a lump sum benefit which is the sum insured.
How is a critical illness plan different from an indemnity plan?
A critical illness plan covers specific illnesses and is a fixed benefit plan which pays the sum insured in a lump sum in case of diagnosis of the covered illness. The benefit does not depend on the medical costs incurred by the insured.
An indemnity plan, on the other hand, covers medical expenses like inpatient hospitalization, ambulance costs, pre and post hospitalization expenses, etc. It pays for the actual medical costs incurred on such covered expenses.
Other differences include the following –
| Critical illness plans | Indemnity plans |
| Premiums are low | Premiums are comparatively higher |
| Sum insured is usually allowed on an individual basis even though family members can be covered | Sum insured can be taken on a floater basis where family members can jointly share in the coverage |
| The benefit paid can be used for any type of financial need | The claim paid is used to pay off the medical expenses incurred |
What do critical illness plans cover?
Critical illness plans, usually, cover the following illnesses and surgical procedures –
| Illnesses | Surgical procedures |
| Stroke which causes permanent symptoms | Open chest CABG |
| First heart attack | Aorta Graft Surgery |
| Cancer | Transplantation of a major organ or bone marrow |
| Coma | Aorta Graft Surgery |
| Multiple sclerosis | Heart Valve Replacement |
| Paralysis of limbs | |
| Kidney failure which requires dialysis on a regular basis |
How is Critical Illness Plan useful?
The benefit of a critical illness plan lies in its claim. The plan pays a lump sum claim which gives the policyholder sufficient funds at his/her disposal for meeting the financial needs. Secondly, the claim paid can be used as per the discretion of the policyholder. Based on his financial liabilities, the policyholder can use the money to
- Pay for advanced medical treatments
- Substitute the family’s income in case of loss of job
- Pay off any outstanding liability like a loan or a credit card balance
- Meet the lifestyle expenses of the family, etc.
So, the plan gives the policyholder financial freedom in case of a critical medical contingency. Moreover, the premiums paid for the plan can be claimed as a tax benefit under Section 80D up to INR 25,000 or INR 50,000 if the insured is a senior citizen.
Critical illnesses are on the rise as you would commonly find more and more individuals being diagnosed with cancer, suffering from a heart attack or a kidney failure or undergoing a heart bypass surgery. In the face of these rising illnesses, having a critical illness plan gives one financial security. So, inform your clients about the need and use of a critical illness health insurance plan so that they can arm themselves against the financial implication of a critical illness faced by them or their family members.
