Term Insurance with Critical Illness Rider

What Is A Critical Illness Rider?

A critical illness rider is an optional rider available with your term insurance plan. It may provide a lump-sum pay-out when you are diagnosed with a critical illness. This pay-out may be used by the policyholder to deal with the treatment costs of the illness or any other financial needs cropping up in such a situation. As with other riders, the critical illness rider may also be opted for by paying a nominal extra premium.

The critical illness rider may be useful add-on. Along with illnesses, a term plan with the critical illness rider may also provide coverage for major surgeries or treatment for certain medical events as covered under the plan.

Some of the common illnesses covered by Critical Illness riders are Cancer of Specified Severity, First Heart Attack of Specified Severity, Kidney Failure requiring regular dialysis, Major Organ/ Bone Marrow Transplant and Stroke resulting in Permanent symptoms. However, the actual CIs covered by riders will depend on rider terms and conditions.

Medical Conditions Included in A Term Insurance With Critical Illness Coverage

insurance with critical illness coverage are as follows:

• Cancer
• First heart attack
• Open chest CABG (Coronary Artery Bypass Graft)
• Coma
• Kidney failure
• Stroke
• Major organ transplant
• Paralysis
• Multiple sclerosis
• Benign brain tumour
• Blindness or deafness
• Motor neurone disease which causes permanent symptoms

The exact list of illnesses covered depends on the policy chosen and the rider coverage. So, check the list when buying term insurance with critical illness cover.

Please review the policy document carefully as the precise list of critical illness covered under each plan varies throughout insurance providers.

How Does The Critical Illness Rider Work?

Let us understand the working of the critical illness rider with the help of an example. Suppose you buy a term plan with ₹50 lakh life cover and ₹25 lakh critical illness cover. If you are diagnosed with a crticial illness that is covered under the rider like cancer, you will get ₹25 lakh (subject to rider terms and conditions) to handle the treatment. Your term life cover remains intact.

What are the Features & Benefits of Critical Illness Rider With A Term Insurance Plan?

The features and benefits of a critical illness rider in term insurance are as follows–

1. The coverage amount and tenure of the rider cannot exceed the coverage amount and tenure of the base plan.
2. The rider may be offered as an inbuilt benefit in some term insurance plans, while in other plans, , it can be taken as an add-on benefit as per the terms and conditions of the plan.
3. A list of illnesses covered by the critical illness rider in term insurance is mentioned in the product brochure/policy document when you buy the policy.
4. A lump sum benefit is paid if the insured suffers from any of the covered illnesses, during the rider term. There’s usually a survival period after which the benefit is paid. This survival period means that the life insured should survive the specified duration after diagnosis of the illness to claim the benefit.

Why Do You Need a Critical Illness Rider with A Term Insurance Plan?

If you take the critical illness rider with your term insurance plan, it may benefit you in many ways, such as:

• Providing support during tough times

  
  

  Being diagnosed with a critical illness may be a difficult situation to go through. It may not be just the diagnosed person that suffers, but also their loved ones undergoing emotional and financial strain. If it is an earning member struck with an illness, the situation may be even more challenging.

  
  

  The financial support of a critical illness rider may bring a great level of relief. It may act as a pillar on which the family may depend for financial help. Amongst other things, it may help the family cover daily costs and act as an income replacement.

  
  

• Allowing for better quality treatment

  
  

  A term life insurance plan with a critical illness rider may help you get good-quality treatment for the diagnosed illness. As you may know, the treatment costs for serious illnesses can be quite high. And since such illnesses may often take a long time to treat, the bills may continue piling up. Even though you may have some savings or an emergency fund for such situations, it may prove to be inadequate. Furthermore, you may end up exhausting those funds, which may not be helpful in the long run.

  
  

  In such situations, the critical illness insurance rider may prove to be of immense help. The considerable pay-out from the rider may allow you to access the treatment you want, without worrying about the lack of funds. With the right treatment, the chances of your illness being cured may increase. Your loved ones may also be relieved of financial woes and may be able to focus on your rest and recovery.

  
  

• Providing tax benefits

  
  

  According to Section 80D of the Income Tax Act of 1961, the premium of a health-related insurance policy may be used to claim tax deductions. This also applies to the critical illness rider purchased with term insurance plans. If the person insured under the rider is under 60 years of age, the maximum deduction one may claim is Rs 25,000. For those over the age of 60 years, the deduction limit may increase to Rs 50,000. This tax benefit may only be applicable to taxpayers under the old tax regime.

  
  

  Thus, opting for the critical illness rider may help you save taxes along with letting you enjoy other benefits.

  
  

What are the Details to Remember When You Opt For A Critical Illness Rider With A Term Insurance Plan

If you are planning to opt for the critical illness rider with term insurance, do keep the following points in mind:

• It is important to determine the required coverage amount under the rider. There is no specific method for the same but you can link it with your annual income to make an informed decision.
• The coverage and premium for critical illness rider should not exceed the coverage and premium of the base insurance plan
• The term for the critical illness rider is restricted and depends on the term of the base policy
• The claim amount paid by the insurer may depend on the severity of the disease. Check the product brochure/policy document for more details
• Lastly, read the policy document carefully to know what is included and what is excluded under the policy.

Things to Consider While Buying A Term Plan With A Critical Illness Rider

To make the most of your term insurance plan with a critical illness rider, it may be vital to select and curate the suitable plan. To help you in the process, here are some things to consider while opting for this rider:

The number of illnesses covered

As with any other type of insurance plan, the coverage of the critical illness may be considered when reviewing it. A preferable critical illness rider may cover a wide list of critical illnesses, major surgeries, and medical events. Also, note the conditions under which the coverage may become valid. The more comprehensive the coverage, the better the plan may be.

Premiums

Since you may already be paying the term insurance premium, you may not want the premium of a critical illness rider to be too high. Otherwise, it may burden you in the long run. Hence, do select a plan offering you an affordable premium while providing good coverage.

Waiting period and survival period

These two tenures may play a big role in whether you receive the benefits of the critical illness rider. Therefore, you may want to make sure that the waiting period and the survival period are reasonable and allow you to claim rider benefits while following policy terms and conditions.

How To Buy a Term Life Insurance with Critical Illness Rider?

You can buy a term plan with a critical illness rider online or offline. Here’s how –

1. Online mode

   
   

   You can visit the insurer’s website and apply for the online term plan with a critical illness rider. Fill out the online application form and submit the relevant documents. Pay the premium online through any of the digital payment modes allowed by the insurance company and submit your application. The application will be processed and the coverage will be allowed.

   
   

2. Offline mode

   
   

   To buy offline you can visit the nearest branch of the insurance company or talk to an insurance agent. You will have to fill out the physical application form, attach the relevant documents and pay the premium. The proposal will be submitted to the insurance company which will underwrite it and issue the coverage.

   
   

   To avail of critical illness cover with term insurance, check whether the coverage is inbuilt or optional. If it is inbuilt, you simply have to follow the aforementioned steps and buy the term life insurance with a critical illness rider. On the other hand, if the coverage is optional, choose to add the rider in the application form, both online and offline. Pay the additional premium required for adding the cover and then submit the proposal form.

   
   

Tax Benefits of a Critical Illness Rider

Critical illness rider not only provides financial assistance during times of serious medical emergencies but also allows for a tax-saving benefit under Section 80D of the Income Tax Act. The table below outlines the maximum tax deductions available based on the age of the assessee and their beneficiaries:

How is a critical illness benefit different from other health insurance plans?

Critical illness benefits are different from regular health insurance. While normal health plans cover hospital bills and offer cashless treatment, a critical illness rider gives you a lump sum on diagnosis, subject to rider terms and conditions.

The health insurance amount can be used for medical bills, home care, travel for treatment, or even daily expenses. Health insurance may have sub-limits and room rent restrictions, but the critical illness payout is fixed and doesn't depend on your hospital bills. Also, it pays even if you don’t get admitted to the hospital, as long as your illness is diagnosed and meets the policy conditions.

Conclusion

A term insurance plan with a critical illness rider may be a great way to safeguard yourself and your family against the diagnosis of a critical illness or medical event. While you may not be able to predict if and when you may be diagnosed with an illness or require major surgery, the least you may be able to do is protect your finances against such an event. You may consult with a financial advisor so that you make an appropriate decision for yourself and your loved ones.

FAQs

1. How does Term Insurance with Critical Illness differ from regular term life insurance?

A regular term insurance policy usually covers the risk of premature demise during the policy tenure. If the life insured suffers from a critical illness, no benefit is paid unless the insured passes away due to the illness or otherwise. If the insured survives after being diagnosed, no benefit is usually paid.

However, under term insurance with critical illness, a benefit is paid if the life insured is diagnosed with a covered critical illness during the policy tenure.

2. Can I buy this insurance if I already have a term life policy?

Yes, even if you have an existing term life policy, you can buy this insurance policy.. This policy would provide additional protection against critical illnesses and also enhance the aggregate coverage. However, when buying the plan, disclose the details of the existing insurance policies to the insurer to ensure hassle-free claim settlements.

3. How much critical illness benefit is required for an individual?

There is no one-size-fits-all. Generally, you must choose a sum that can easily cover your treatment cost and income loss for 1–2 years. Usually, ₹25–50 lakh is a good range.

4. Is it worth getting critical illness rider ?

Yes, because treatment for major illnesses can cost lakhs. This rider provides financial support when you need it most.

5. What does the critical illness rider cover?

It covers diseases like cancer, heart attack, kidney failure, stroke, and more, depending on the insurer’s list.