All About Critical Insurance Policy and Its Benefits


These days, critical illnesses are more common. According to a study, these illnesses are now responsible for 60% of deaths in India.

Furthermore, the costs of treating these severe illnesses are rising rapidly, putting individuals and their families in financial trouble. In extreme situations, their savings can be wiped out completely, trapping them in debt or causing them to fall behind on their financial goals.

Given the high cost of critical illness treatments, obtaining a critical illness insurance plan would be an excellent approach to cover these costs without jeopardizing a family’s regular income.

Who should consider critical illness insurance, and what is it? 

A critical illness insurance policy is a type of health insurance policy that pays monetary compensation to the person diagnosed with one of the critical illnesses listed in the policy. 

Once the insured gets diagnosed with a critical illness and the waiting period has expired, the insurer will pay the insured a lump sum payout in exchange for premium payments. The payout might be used according to the insured’s needs. 

A critical illness insurance coverage may be purchased by the following people:

  • Individuals who have a family history of critical illness are more prone to develop it themselves. Thus, they can have it. 
  • The family’s breadwinner role and relevance are critical. This will badly impact the family’s financial future if something happens. Thus, getting critical illness insurance for them is essential.
  • According to research, people who work in high-stress environments are more likely to get serious illnesses. As a result, these individuals can think about purchasing critical illness insurance.
  • Critical illnesses are more likely to strike people beyond the age of 40. Thus, they can consider buying the policy.

What is the significance of having a critical illness plan?

Taking a critical illness insurance policy has many benefits:

  • When someone is diagnosed with a severe condition, medical treatment can be incredibly costly, becoming a significant financial strain. Medical bills and hospitalization are covered under critical illness insurance coverage.
  • In a critical illness, individuals and their entire families get financially impacted. Thus, the policy will provide monetary compensation that can be used to meet healthcare and household expenses.
  • The emphasis needs to be on medical treatment while coping with an illness. A critical illness policy eliminates the financial burden of treatment and lost workdays.
  • The critical illness insurance policy will pay out a lump sum if the person is diagnosed with one of the listed illnesses. They have complete discretion over how they want to spend the funds. 
  • The payout from critical illness insurance is tax-free u/s 80D of the Income Tax Act. 
  • Even if the insured’s treatment occurs in another nation, critical illness insurance may cover them.

How does a critical illness insurance plan work?

The critical illness insurance policy will pay out a lump sum if the person is diagnosed with one of the listed illnesses. They have complete discretion over how they want to spend the funds.

The premise for determining how much coverage one requires is to compute the monetary losses if one stops working due to illness. 

A critical illnesses policy covers heart attacks and strokes, cancer, Parkinson’s disease, meningitis, deafness, head damage, etc. Further, check the policy document to examine what all illnesses are covered.

Some of the most typical critical illness policy exclusions are listed below. However, read the policy paper carefully to learn about the specific exceptions.

  • During the survival stage, death occurs
  • Illnesses that develop while the waiting period (usually around 90 days).
  • Smoking, tobacco, drinking or drug usage causes sickness
  • Complications associated with pregnancy or childbirth
  • This policy does not cover HIV/AIDS
  • Injuries caused by participating in war or terrorism, etc.

What to look for before purchasing a critical illness cover?

Before obtaining a critical illness plan, take into account the following factors: 

  1. Financial position

Treatment for an acute illness can be expensive. Thus, it is essential to check one’s financial position to identify whether the treatment costs can be covered. A person can learn about the prices from a reputable medical expert or a knowledgeable individual. They can get some ideas by doing some internet research.   

  1. Diseases covered and exclusions 

As the sorts of diseases covered vary by firm, conducting a self-assessment to select a plan that meets one’s healthcare needs is recommended. 

A person needs to examine their medical history, health profile, and lifestyle to spot the diseases they could be susceptible to. 

Further, it is also crucial to keep track of what their critical illness insurance coverage does not cover. 

  1. Sum assured

The quantity of coverage a person requires is critical in determining which policy is best for them. Some illnesses have less expensive treatment options than others. 

Thus, if individuals know how much insurance they will require, it will help them choose the best plan for their needs.

  1. Rider or Standalone 

Critical insurance coverage can be added as a rider or add-on to an existing policy or purchased separately.

Since a standalone policy has a higher premium than a rider, it provides complete coverage. Although a rider may cover the same range of acute illnesses, the amount of coverage or the sum assured is decreased.

  1. Waiting period 

A critical illness plan will usually include a time limit after which it becomes effective, known as the waiting time. It begins when one acquires critical illness insurance and continues until the rewards are received. 

Generally, the waiting period is of 30-90 days. Thus, it is vital to choose a plan that kicks in as soon as possible. 


In India, the current pandemic has significantly raised insurance awareness. People have begun purchasing life, health and critical illness coverage.

A critical illness often cripples an individual’s financial stability and savings, and a critical insurance policy helps with the significant financial loss incurred. The critical disease usually leaves the victim struggling to pay their medical bills, living costs, and other expenses associated with their treatment. 

Critical illness policy helps fight the financial standing of a victim who has been diagnosed with a critical illness. Thus, a critical insurance policy will provide monetary compensation to individuals suffering from critical diseases.

When buying a critical insurance policy, it is essential to know how it can help a person in the long run. They must understand what they are getting into when they buy one of these policies. Thus, take a look at some of the benefits of this kind of insurance policy and why it is important to have one.

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