Understanding Critical Illness Rider: Enhancing Term Insurance With Comprehensive Coverage

A critical illness rider is an add-on to a term insurance plan that provides extra financial support in the event of a medical emergency. This rider can be purchased for a small additional premium and will pay out a lump sum if the policyholder is diagnosed with a critical illness during the plan term. Critical illnesses covered usually include cancer, heart attack, stroke, and kidney failure, among others. The payout from this rider can help cover treatment costs, such as hospitalisation, ambulance expenses, and medicine costs, as well as provide income replacement if the policyholder is unable to work due to their illness. This rider can be an important form of financial protection for individuals and their families, helping to ease the burden of unexpected medical costs associated with critical illnesses.

Lump-sum payment without deductions

A critical illness rider is an optional add-on to a term insurance policy that provides a lump-sum payout when the policyholder is diagnosed with a critical illness. This payout can be used to cover medical expenses, replace lost income, or pay off debts. The benefit is usually paid in a single instalment, but some policies may offer monthly payouts.

The lump-sum payment provided by a critical illness rider can be a significant advantage when facing a critical illness diagnosis. Here are some of the key benefits of this feature:

• Lump-Sum Payment Without Deductions: The full benefit amount is paid out immediately upon diagnosis, regardless of the actual treatment expenses incurred. This provides financial support to manage medical costs and other expenses associated with the illness.
• Coverage of High Medical Costs: Critical illnesses often require expensive treatments, and the lump-sum payment can help cover these costs, filling the gaps left by standard health insurance policies.
• Income Replacement: If the policyholder is unable to work due to their illness, the lump-sum payment can serve as income replacement, ensuring that their family's financial needs are met during the treatment and recovery period.
• Unrestricted Use of Funds: The payout from a critical illness rider can be used for a variety of purposes, including medical bills, living expenses, debt repayment, or any other financial needs that may arise during the illness.
• Supplemental Coverage: The critical illness rider provides additional coverage on top of any existing health insurance policies, ensuring that the policyholder has ample financial resources to manage their medical and living expenses.
• Reduces Financial Stress: By providing a lump-sum payment, the critical illness rider alleviates the financial burden associated with a critical illness diagnosis, allowing the policyholder to focus on their treatment and recovery without worrying about finances.

Coverage for medical expenses

A critical illness rider is an add-on to a term insurance policy that provides a lump-sum payout if the policyholder is diagnosed with a specified critical illness. This payout can be used to cover medical expenses and treatment costs. The illnesses covered vary by insurer but typically include heart attacks, strokes, cancer, kidney failure, and major organ transplants. The rider can be purchased for an additional premium and provides extra financial protection and peace of mind in case of serious illness.

The critical illness rider benefit can be used to cover a wide range of medical expenses, including:

• Hospitalization and treatment costs
• Ambulance charges
• Doctor's fees
• Medicine costs
• Room rent
• Other related expenses

The payout from the critical illness rider is typically a lump sum, which can be used to cover these expenses without any restrictions. This ensures that the policyholder can focus on treatment and recovery without worrying about financial strain.

In addition to coverage for medical expenses, the critical illness rider may also provide income replacement if the policyholder is unable to work due to their illness. The lump-sum payout can be used to cover daily costs, such as rent, utility bills, and children's fees.

Income replacement

Being diagnosed with a critical illness can be a cause of concern in multiple ways, one of them being the loss of income. You may be required to quit your job and concentrate on your treatment, which can result in a massive loss of savings. However, if you have a critical illness rider along with a term insurance plan, you will have no concerns regarding the financial future of yourself and your family.

The critical illness rider provides a lump-sum payout if the policyholder is diagnosed with a covered critical illness. The payout helps to pay for the treatment and can replace lost income during recovery. The rider financially protects the policyholder and their family by providing a lump sum amount on critical illness diagnosis. The amount received can be used to cover the treatment of the diagnosed illness.

The critical illness rider can be purchased during the policy inception or on any subsequent policy anniversary of the base policy. The rider terminates once the rider sum assured has been paid or on the completion of the policy term of the rider, whichever is earlier.

Benefits of the Critical Illness Rider

• Low Cost for High Coverage: Critical illness riders provide high coverage amounts. The payout helps to shoulder the cost of treatment for heart attacks, cancer, and kidney failure, all of which require a significant financial investment.
• Better Chances of Survival: Your critical illness rider provides a quick payout, allowing you to access funds for your treatment. The sooner you get treated, the better your chances of survival.
• No Change in Premium: Buying a critical illness rider along with your term insurance policy will definitely add an amount to your premium. However, this would not increase your premium in case you are diagnosed with any of the covered critical illnesses.
• Large Cover: The treatment cost for critical illnesses is quite high. The critical illness rider comes as a boon that provides wide coverage against multiple critical illnesses and that too, at a nominal additional premium price.
• Lump Sum Benefit: Critical Illness Rider helps the policyholder manage their treatment expenses by paying a lump sum amount. The policyholder receives all the amount in one go, which comes across as a major sigh of relief as the policyholder is able to pay for the treatment costs without worrying about a lack of funds.
• Increased Survival Chances: Due to the skyrocketing cost of critical illness treatment, many people are not able to afford the treatment. There are many who have to leave their treatment in the middle due to a lack of funds. Having a critical illness rider to support you over your term insurance policy will ensure that you are never in the position of compromising your treatment due to the unavailability of funds. Chances of death decrease due to proper treatment, thereby increasing the policyholder's chance to survive despite the critical illness.
• Double Tax Benefits: Policyholders with term insurance are eligible for tax benefits. When a policyholder buys a critical illness rider along with their base term insurance, their tax benefits get doubled.

Tax benefits

A critical illness rider provides additional tax benefits to the policyholder on top of the regular tax benefits of a term insurance plan. The rider provides for an income tax rebate under section 80D of the Income Tax Act, 1961. This section of the tax act allows the policyholder to claim deductions on the premium paid towards health insurance policies. The maximum deduction allowed is Rs 25,000 for individuals below 60 years of age and Rs 50,000 for individuals above 60 years of age.

Additionally, the benefits received under the critical illness rider are also tax-exempt under section 10(10D) of the Income Tax Act, 1961. This means that the lump-sum payout received upon diagnosis of a critical illness is not subject to taxation.

The combination of these tax benefits makes the critical illness rider a very attractive option for individuals looking to enhance their term insurance coverage. By opting for this rider, individuals can not only increase their financial protection but also enjoy additional tax savings.

Other Benefits of a Critical Illness Rider

In addition to the tax benefits, a critical illness rider offers several other advantages to the policyholder:

• Lump-sum payout: The rider provides a lump-sum payout upon diagnosis of a critical illness, which can help cover medical expenses and other financial needs during this difficult time.
• Income replacement: If the policyholder is unable to work due to their illness, the payout from the rider can act as a replacement for their income, helping to cover daily expenses and maintain their family's standard of living.
• No change in premium: The premium for the critical illness rider remains the same even if the policyholder is diagnosed with a critical illness, ensuring that they don't face additional financial burden during an already challenging time.
• Large cover: The rider provides coverage for a wide range of critical illnesses, including cancer, heart attack, and kidney failure, which can be extremely costly to treat.
• Increased survival chances: By providing financial support for treatment, the rider can increase the policyholder's chances of survival and full recovery.

Eligibility and Exclusions

When considering a critical illness rider, it is important to review the eligibility criteria and exclusions. The minimum entry age is typically 18 years, while the maximum age varies between 60 and 65 years, depending on the insurer. The coverage period is usually linked to the base term plan, and the rider may cease if the base plan is terminated.

Some key exclusions under critical illness riders include pre-existing diseases, congenital infections, participation in war or criminal activities, and self-inflicted injuries.

A critical illness rider is a valuable addition to a term insurance plan, providing enhanced financial protection and tax benefits in the event of a critical illness diagnosis. By opting for this rider, individuals can gain peace of mind knowing that they have additional support during a medical crisis.

Coverage for a wide range of critical illnesses

A critical illness rider is an add-on to a term insurance plan that provides extra financial assistance in the event of a medical emergency. This rider can be purchased during the inception of the policy or any subsequent policy year of the base plan. The cost of adding this rider is an additional premium on top of the base premium.

The critical illness rider covers a wide range of critical illnesses, including:

• Cancer of specified severity
• Heart attack
• Stroke
• Loss of limbs
• Multiple sclerosis
• Parkinson's disease
• Major organ transplant
• End-stage liver failure
• Kidney failure requiring regular dialysis
• Primary pulmonary hypertension

The benefit amount provided by the critical illness rider is typically a lump-sum payment made to the policyholder upon diagnosis of a covered critical illness. This payment can be used to cover medical expenses, such as hospitalisation, ambulance expenses, cost of medicines, and room rent, as well as daily expenses and income replacement if the policyholder is unable to work due to their illness.

The critical illness rider also offers tax benefits under section 80D of the Income Tax Act, providing additional savings to the policyholder.

Frequently asked questions