Insurance

While life insurance & health insurance are topics covered extensively by media, one rarely reads or hears about critical illness insurance. Every time I have tried telling people about the need for this product, I get a strange look followed by “didn’t we just discuss my health cover”, as not many can distinguish between the two.

Critical illness insurance pays you the sum insured on being diagnosed with a critical illness which is covered under the policy, provided you survive for the minimum survival period as per the terms of the policy.

Health insurance policy will reimburse the cost incurred by you including hospitalization, diagnostic tests and medicine for a specified number of days pre and post the illness.The critical illness policy will pay you the sum insured on being diagnosed with an illness covered under the policy “no questions asked”. Critical illness is not a reimbursement plan.

Most of us underestimate the chances of being diagnosed with a critical illness. As per a newspaper article published a couple of years back “It is estimated that by 2020 cardiovascular disease will be the cause of over 40 per cent deaths in India. India is set to be the ‘heart disease capital of the world’ in few years” The treatment for the same can set you back by 3 to 7 lakhs.

As per another article in Business Today a couple of years back “millions are grappling with the prohibitive cost of cancer treatment in India, where the disease has wiped out entire life savings and even forced some people to sell their homes” It further gives indicative cost of treatment. I have reproduced that paragraph in italics below.

“Breast cancer patients, need targeted treatment drugs, such as Herceptin or Herclon, made by global major Roche, which cost around Rs 75,000 for a course; a patient could need up to 17 courses. Similarly, a drug called Avastin – used to treat colon, kidney, lung and gall bladder cancer – can add around Rs 8 lakh to a patient’s bill at around Rs 1 lakh a cycle”.

It is worth noting that the above estimates take only treatment costs and do not factor in other costs related to inability to work and lifestyle changes associated with the illness.

So how is a critical illness different from a health insurance?

A health insurance reimburses expenses incurred due to hospitalization and medical expenses related to the hospitalization. Critical illness insurance pays the entire sum insured on being diagnosed with a critical illness covered under the policy. It is not a reimbursement and hence has nothing to do with hospitalization.

What should you look for in a critical illness policy apart from the premium?

One should primarily look at illness covered & survival period apart from the premium while deciding on the policy. It may be worthwhile to note, that your application for a policy may be rejected by the insurance company and hence it may make sense to apply to a company who is likely to accept your application. This information can be obtained from somebody who deals with these companies regularly.

What are Illnesses covered under a critical illness policy?

The number of critical illness covered differs from company to company. You also get policies which cover one single illness example Cancer Care. Some of the more common critical illnesses include

• Heart attack
• Cancer
• Paralysis
• Coronary artery bypass surgery
• Major organ transplant (e.g. heart, lung, liver, pancreas)
• Stroke
• Kidney Failure

What is Survival period?

Most critical illness policies come with a survival period which could range from a few days to a few months. This essentially means you need to survive the pre-specified period after being diagnosed with the illness to be eligible for a claim.

Who should opt for this policy?

This policy ensures that the financial burden of illness is circumvented and hence everybody should opt for it. People with family history and primary bread winners should definitely ensure that they are adequately insured.

What does it cost?

The premium is based on age, the premium for a healthy 30 year old for 20 lakhs policy should be approximately INR 7,500. Like in the case of health insurance the premium will increase with increase in age and is not fixed.

Are there any tax benefits?

Premium paid towards critical illness insurance can be claimed as deduction under section 80 D, the limit of this section have been increased in the recent budget. Under Section 80D, the premiums paid towards health insurance/critical illness policies for self, spouse, children & parents are allowed as a deduction. For this FY the limit has been raised to INR 25000,for senior citizens the limit is INR 30,000. I have written on this subject earlier and am giving you a link to the article. https://finwise.in/blog/?ph=412 

Should we take a stand alone policy or opt for a rider with an existing life insurance policy?

When you opt for a critical illness rider with your life insurance policy the premium remains constant throughout your tenure. Whereas with a stand-alone policy it increases every time you cross the age slab. The issues with opting for a rider are two. Firstly these riders are taken when you buy the policy and you may not be able to opt for it at a later stage. So if you already have a life insurance policy you may not be able to add-on a rider now. Secondly the sum insured in a critical illness rider may be limited and may not suffice. My Suggestion would be to go in for a combination of both with the purpose of having adequate insurance.

While it is good to hope for the best, it is equally important to plan for the worst. Let us endeavor to keep illness at bay and double our time invested in fitness. At the same time take adequate measures to mitigate the financial risk arising out of the illness. God forbid if you were to be diagnosed with a critical illness, there should be nothing which stands between you and the best healthcare possible.

Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

1. Exclusions:

Almost all health care policies come with exclusion i.e. no cover for treatment for a specific period or a specific time frame or a combination of both
• All treatments within the first 30 days of cover except any accidental injury are excluded
• Preexisting disease by definition are those disease which are in existence prior to opting for a health care policy and have to be mentioned in the proposal form for the policy to be valid. Treatment for preexisting disease is not covered generally for a period of 36 to 48 month from the time of taking the policy. The waiting period differs from policy to policy
• 2 years waiting period for specific diseases like cataract, hernia, joint replacement surgeries, surgery of hydrocele etc.
This list is indicative and not exhaustive, westrongly recommend you go through the exclusions in detail before opting for the policy

2. Cashless

Insurers or the third party administrators who facilitate insurers have to tie up with hospitals for cashless hospitalization, the list of hospitals where the insurance company have tie up is available easily and it is important to check the list to ascertain if there are adequate number of hospitals in the list and to find out if the hospital you are most likely to go it in case of a planned procedure is part of the list. While a hospital could be covered for cashless hospitalization at the time of taking the policy it is not necessary that this arrangement continues. It is quite possible that cashless facility with a particular hospital is discontinued at a later stage, therefore it is essential to check the list of hospitals for cashless facility on a periodic basis. While treatment is possible in hospital where the tie up does not exist, it comes with separate terms and conditions. The bill needs to be paid first and claimed later

3. Sub limits

Some policies have sub limits i.e there are predetermined maximum caps for certain procedures, room rent etc. This essentially means no matter what the cost of the procedure or room rent is, the policy will reimburse upto a predecided maximum cap. Example if you pay Rs. 5,000 per day for room charges and your policy has a sublimit of 2,000 per day for room charges you will only be reimbursed Rs. 2000 and the remaining Rs 3000 will have to be borne by you. It is desirable to have a policy which does not impose such limits. In case you have an existing policy this would be good time to understand the limits considering you are not in the midst of an emergency.

4. Renewability

Some policies have maximum coverage age beyond which they do not renew insurance. Since medical insurance is a yearly contract it is imperative to check this aspect. It has greater relevance given the fact that companies shy away from insuring an older person with preexisting diseases.

5. Adverse Loading

When there are claims against your policy some companies increase premium to compensate them for increased claims. Which means you may end up paying higher than normal premium charges for your age if you have claimed the previous year. Some do not indulge in such practices. Once your policy is accepted without any special conditions or additional loading, premiums are purely based on age.

6. No Claim Bonus

The reverse of the above is also true and all companies incentivize you for a claim free year, majority of them offer no claim bonus which is an increase in the sum assured this can range anywhere between 5% and 50% per year. Example Suppose X has a policy for 3 lakhs and does not have any claim in a particular year , in case of 5% NCB the sum insured will be 3,15,000 for the next year in case of 50% NCB the sum insured become 4.5 lakhs for the next year. The amount of no claim bonus depends on the policy opted for.

7. Co payments

Policies sometimes have Co -payment conditions. That is a certain percentage of the expenses incurred will have to be borne the insured. Example a 10000 policy with 20% co-payment rule requires that incase of claim of Rs.10000 you bear cost of Rs.20000 while the insurance company bears Rs.80,000 While some policies make this optional and give discounts in premium for opting for such a facility others have a mandatory rule.

8. Add on policies

As per many newspaper report medical costs are increasing at an alarming rate every year. If you have a basic insurance and now feel you are not adequately insured you can go in for an add-on policy which covers with a deductible. The premiums by virtue of design of these products are very low and affordable. It may be economical to opt for two polices one for basic and one with deductible to keep your premium at acceptable levels.
Deductible are amount beyond which the insurance company will entertain claims. Example if your policy is for 10 lakhs with a deductible of 3 lakhs it would mean that the company will entertain claims beyond 3 lakhs upto 13 lakhs. These policies also have terms and conditions and it is absolutely essential to understand them before you choose to go for it.
Should you have any further queries on the same feel free to drop in an email to prathiba.girish@finwise.in will be glad to be of assistance to you

Buying a car insurance has indeed become a breeze, thanks to online presence of General insurance companies you can switch, renew or buy afresh within minutes. Is the premium charged the only criteria for your choice of insurer? Cheapest premium does not necessarily mean value for your money. Hear is why.

Car insurance typically has two components to it
Third party liability insurance: this covers liability for injuries and damages to others that you are responsible for
&
Own Damage Cover: damage to the vehicle due to perils like fire, theft etc are usually covered under own damage section of the Motor Insurance policy:

While third party liability cover is compulsory as per the law, own damage cover is not. However it is advisable to go in for a policy which covers both. Policies covering both own damage and liability cover are normally referred to as Comprehensive package/ Policy. While the premium charged for third party liability is decamp by IRDA. The own cover premium is fixed by the insuring company.

1) The company charging you the cheapest premium may not necessarily mean value for your money

The premium charged for own cover is dependent on a lot of factors like IDV “Insured’s Declared Value”. IDV reflects the maximum amount payable by the company in case of a total loss of the vehicle. It is possible for a company to charge you a lower premium and provide you a lower IDV thereby limiting their liability in case of own damage.

Other factors which you should take into consideration for making an apple to apple comparison are deductibles and coverage. Deductible is the amount over and above, which the claim will be payable. There is a normal standard/ compulsory excess for most vehicles ranging from Rs. 50 for two wheelers to Rs. 500 for Private Cars and Commercial Vehicles which increases depending upon the cubic capacity/ carrying capacity of the vehicle. However, in some cases the insurer may impose additional excess. Higher educible reduce the premium.

2) You can port your policy from one company to another and carry forward your no claim bonus

Porting your policy from one company to another is actually simple, all you have to do is initiate the process a fortnight in advance, this is to ensure you have enough time to compare and renew without letting your existing policy lapse. No claim bonus is the discount give to you on your own damage premium for claim free year. The percentage of discount increases with every claim free year and is a maximum of 50%. No claim bonus will be carried forward to the new insurance company.

3) No claim bonus for your old car can be carried forward to your new car

This is something which most of us is unaware of, if you are upgrading you would be having insurance on your existing car which in all likelihood would be sold off. The no claim bonus that you have accumulated on your existing car can be carried forward to the new car.

The procedure is as follows. You can transfer the policy in the name of the buyer of the car and get a no claim bonus certificate or no claim bonus reservation letter from the insurance company. On producing this letter you can earn a discount on the premium. When you upgrade your car the price is substantial and transferring your no claim bonus could lead to good savings

4) Your policy can be transferred in the name of the person who buys your car from you.

The insurance can be transferred to the buyer of the vehicle, provided the seller informs in writing of such transfer to the insurance company. A fresh proposal form needs to be filled in. There is a nominal fee charged for transfer of insurance along with pro-rata recovery of NCB from the date of transfer till policy expiry. It may be noted that transfer of ownership in comprehensive/ package policies has to be recorded within 14 days from date of transfer failing which no claim will be payable for own damage to the vehicle

5) If you let your policy lapse you stand to lose out on benefits and face huge inconvenience in renewing the same.

If you let your policy lapse due to oversight or any other reason you could face a lot of inconvenience. If a lapsed comprehensive motor insurance policy requires renewal you need to fill up a fresh proposal as if you were insuring a new vehicle. The insurance company will offer the insurance only after a physical inspection of the car to check for pre existing damages which needless to say will not be covered by the insurance company. They may also charge you a higher premium or downright reject your proposal. If the policy is in lapsed state for 90 day and above you will lose out on the No claim bonus accumulated thus far. It is against the law to drive a vehicle without insurance and hence you will not be able to use your vehicle in the period when your lapsed policy has not been renewed. Any loss whether due to theft or natural calamities will not be covered in this period. It is therefore prudent to keep a close watch and renew insurance well in time to give you peace of mind.