4 steps to decode a critical illness plan

By Neeraj Basur

Critical illness is largely a misunderstood term in India. And this, ironically, in a country where the onus of planning and paying for critical illness is on the individual and not the employer or the government!

It is therefore very important for us to understand the concept of critical illness plans so that our spending on insurance is optimal. Here are simple 4 steps to de-codify and device your critical illness plan.

Step 1: Starting by understanding: what is critical illness?

There is no one clear definition of critical illness. However, as the name suggests, this covers more serious forms of illnesses such as paralysis, cancer, stroke, coronary artery disease, multiple sclerosis, heart valve disease and renal failure. Essentially, the kind of illnesses, where mortality is not only high but there is also a pronounced strain on the lifestyle of the patient's household, both mentally as well as financially.

Step 2: How does a critical illness plan help?

There is no dearth of examples of how critical illnesses such as the ones mentioned above afflict the patient as well as their households. These illnesses are marked by large treatment bills, numerous diagnostic tests and large period of absence from active life. What one do not want to deal with at this time is the pain of arguing and going through what is covered or not covered by insurance and when one gets the amounts refunded or taken care off. The critical illness plan helps take away this undesired complexity.

The plan works on diagnosis of the disease rather than other metrics such as hospital stay or reimbursement of bills. All that the insurance provider needs to know is evidence of a positive diagnosis to disburse the sum ensured. Hassle free? Certainly. And that is precisely the point: let the afflicted patient deal with one less problem by taking care of the finances!

Step 3: Solo or with health cover?

Remember that critical illness plans are no substitute for the regular health cover. By definition, its application is restricted to 'critical illness' conditions and is not all encompassing. However, in combination with the regular health cover, the critical illness plans work to your benefit.

Imagine an individual who has been diagnosed with cancer and the patient has a health cover of Rs 5 lakh. There are three obvious questions – is this cover enough? What payments are covered? When does the patient or the hospital get paid?

In a regular health cover, the payment typically is associated with hospitalisation. But what happens when the total expense associated with the complete treatment is Rs. 7.5 lakh and out of which the hospitalisation expense is exactly Rs 5 lakh.

Typically, a good insurance policy should take care of the hospitalisation expenses – no doubt there. But how about the other Rs. 2.5 lakh of expenses related to the innumerable diagnoses pre- and post hospitalisation and the period of inactivity which the illness causes? Having a critical illness plan would give you an additional amount to cover that Rs. 2.5 lakh worth of expense.

The two important points form this step are:

(1) The affected person gets paid the full sum ensured and does not have to show evidence of the actual expense, unlike other health insurance types and

(2) The basis of the payment is a positive diagnosis rather than hospital stay.

Step 4: Understanding the caveats and pitfalls

A word of advice to those evaluating and comparing different critical illness plans: Watch out for these:

1. What's covered? The more conditions covered the better. Incidence of critical illnesses in India is on the rise and going by the lifestyle changes is destined to continue rising. So, ensure that you chose a plan which is comprehensive enough.

2. How much is the coverage? A small coverage would make your planning redundant. Treatments become expensive in a hurry, driven by better drugs as well as general inflation. Chose a plan which gives you enough coverage so that you have one less problem to deal with

3. Corner case scenarios? If the insured does not survive 30 days post the claim, or has been diagnosed within 90 days of purchasing the plan, he or she cannot claim any benefit from the cover

4. Term? While general insurers typically offer a critical illness cover for 1-5 years, life insurers provide this as a rider for a relatively longer period, typically between 10 and 20 years.

The most important advice of all: Lead a healthy lifestyle, so that you yourself minimise the chances of contracting a critical illness.

(Author is CFO, Max Bupa. Views expressed in this article are author's own and do not represent those of The Indian Express)

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