Is critical illness cover necessary?

In the last column we initiated a discussion on how vital Term Insurance Cover is for anyone with even a single financial dependant.
For representational purposes
For representational purposes

In the last column, we initiated a discussion on how vital Term Insurance Cover is for anyone with even a single financial dependant. It is worth noting that at the turn of the decade viz. prior to the start of the financial year FY 20-21, barely 10per cent of those with the means, were interested in buying health insurance to cover new-age diseases.

But since the advent of the fear instilled by the pandemic, 71 per cent now consider health insurance a necessity. Notably, and almost overnight, 57 per cent of those surveyed a year ago, claimed to have understood the importance of comprehensive health insurance plans.

That this has not translated into an immediate increase in such coverage is both a reflection of respondent inertia till it is too late and perhaps the lack of an even more aggressive awareness program on the part of insurance companies.

This brings me to a very crucial Insurance product, namely critical illness Insurance Cover. Most people tend to overlook it believing that since they have Mediclaim they are adequately covered. But the fact is, firstly there has to be hospitalization for Mediclaim to kick in, and further, there are often caps and sub-limits that will easily be exceeded in the event of a critical illness.

Furthermore, escalation in Premium payable in case of Mediclaim is a given, especially post a year like the last one where huge payouts have been made.

In contrast to this, there are Critical Illness insurance policies that offer the optional benefit of covering several ( approximately 30 usually ) Critical Illnesses such as cancer, heart attack and kidney failure for a maximum of 30 years without any change in premium.

What also makes some of these product offerings distinctive is that it gives full claim payout on the first diagnosis of any of these covered Critical Illnesses, even without Hospital Bills. This payout amount is crucial as it can also safeguard one’s family against the loss of income arising out of the illness, which could put one out of action for a prolonged period of time.

Critical Illness policies come bundled with an equivalent Term Plan and that usually adds an enhanced financial ring around the family of the one with a Critical Illness in the event of non-survival. That the payment of Premium paid under such a policy can be demarcated and qualifies for deductions under both, Section 80C as well as Section 80D of the Income Tax Act, offers an additional benefit.

Finally, one must remember that if ever diagnosed with a Critical Illness, it can affect one physically, emotionally and financially. By investing in a Critical Illness cover, one can at least take the inevitable financial pain and insecurity out of the equation.

This is because claiming a Critical Illness payout does not prevent one from claiming a Mediclaim reimbursement separately. So, give fresh thought to whether Critical Illness Insurance cover is necessary.

Ashok Kumar is Head of LKW-India. He can be reached at

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