Which is better: a critical illness rider or a standalone plan?
By Deepak Yohannan
A comprehensive health plan is a boon, given the ever-increasing healthcare costs. However, it may not provide enough security if you were to be diagnosed with a life-threatening ailment. Specialised care for critical illnesses is expensive and often lifelong. That is where a critical illness cover could come handy.
Cancer, heart attack and stroke are the three most common ailments coming under the purview of critical illness cover. However, critical illness plans provide coverage for many more ailments including end-stage renal or liver failure, paralysis, multiple sclerosis, and more. Most critical illness plans cover anywhere between 12 and 15 ailments.
How does critical illness cover work?
We know that life insurance pays out a death benefit when the policyholder dies. A critical illness cover, however, provides a living benefit when the policyholder survives a life-threatening ailment covered by the plan. Most plans come with a survival clause, which means that the policyholder can file a claim only after surviving the life-threatening condition for a specified period – usually 30 days.
This kind of cover emerged from the realisation that people who survive life-threatening conditions face tremendous financial hardship due to high medical bills and loss of income. Critical illness cover is a hedge against such financial difficulties. Such covers are generally of two types: standalone critical illness plans and critical illness riders.
How does a critical illness rider differ from a standalone plan?
First, let us define the two types of critical illness covers:
Standalone critical illness plan
Such a plan can be bought from any general insurer. It provides coverage for only critical illnesses. Unlike critical illness riders on life insurance plans, standalone policies do not provide a death benefit.
Critical illness rider
A critical illness rider can be clubbed with your existing life or health insurance plan. In the case of a life insurance plan, the policyholder can benefit from a death benefit or a critical illness benefit. When added on to a health plan, the critical illness benefit could come as a lump sum even as the health coverage takes care of other medical expenses under its purview.
Points of difference between the two types of critical illness coverage
1. Coverage Amount: A standalone policy gives you greater flexibility to determine the sum insured. A critical illness rider, on the other hand, cannot exceed the coverage amount of the base policy. Thus, a standalone policy may be a better option for people who need higher coverage.
2. Renewal: The critical illness rider on a life insurance policy enjoys a longer tenure, but a standalone policy must be renewed every five years. On the other hand, the termination of the health or life policy to which the critical illness rider is added also indicates the discontinuation of critical illness coverage.
3. Premiums: Since standalone policies must be renewed every five years, the premiums change as per the age and health conditions of the policyholder. The premiums on a critical illness rider remain unchanged for the duration of the base policy, and therefore, tend to be cheaper.
4. Ailment Coverage: Generally, a standalone policy covers more critical ailments than a critical illness rider does.
So, which is better? A standalone policy or a rider? There is no single answer to that question. It all depends on your health background and your specific financial needs.
(The author is the CEO of MyInsuranceClub.com, an online insurance price & features comparison portal)