Financial PlanHealth InsuranceInsurance

Everything You Need to Know About Critical Illness Cover Health Insurance Plans

It is rightly said – health is the greatest gift of all. It, therefore, becomes necessary to safeguard yourself against medical contingencies. You may do so by investing in a medical insurance policy. Such a policy offers coverage against hospitalization-related expenses such as room rent, doctor’s fees, nursing fees, and cost of medicines, among others. It also covers outpatient costs relating to expenses incurred outside of the hospital such as consultation fees, diagnostic tests, and medicine bills. Purchasing a mediclaim policy provides the much-needed financial security in case of medical emergencies.

About critical illness insurance policy

Given the ever-increasing medical inflation, it becomes imperative to think beyond your basic health insurance policy. Remember, a basic policy does not cover certain illnesses such as cancer, paralysis, and AIDS, among others. In order to receive coverage against these illnesses, you may create a secondary financial buffer through a critical illness health policy.

A critical health cover, also known as dread disease policy, works differently as compared to mediclaim plans. In a critical policy, a guaranteed cash amount is paid upon diagnosis of any of the illnesses mentioned in the policy document. The lump sum amount that is payable is equivalent to the sum assured amount. You may note that the insurance provider is liable to pay the entire sum assured amount, irrespective of the hospital expenses incurred towards the cost of treatment. Such a policy is, therefore, a defined-benefit plan, as the payout amount is fixed. Due to this, you may opt for more than one insurance cover, as every policy will pay you if you are diagnosed with any of the dread illness.

Scope of coverage

The scope of coverage of a critical illness policy varies from insurer to insurer. Some of the common illnesses covered under this plan include cancer, kidney failure, heart attack, stroke, Multiple Sclerosis, permanent paralysis of the limbs, major organ transplant, and bypass surgery, among others. The coverage amount is generally from INR 1 lakh to INR 50 lakh. This policy benefit is available for individuals between the ages of six to 60 years.


You may note that a critical policy does not cover treatment towards certain ailments or conditions such as HIV/AIDS or treatment arising from pregnancy or childbirth. Other common exclusions include any act of a foreign enemy, civil war, revolution, invasion, and losses due to business interruption, among others. It also does not cover any critical illness that was contracted before the purchase of the policy, any disease diagnosed during the waiting period, or death within 30 days following the diagnosis of the ailment. Keeping these exclusions in mind will help you become a well-informed policyholder.

Advantages of purchasing a critical illness policy

The benefits offered by a critical health cover cannot be undermined. It offers financial security if the unexpected happens.

Following are six major benefits of purchasing such a policy.

  1. Peace of mind

You are free from any financial worry as your policy will help you meet your obligations, be it treatment towards your disease or meeting your lifestyle expenses. For example,  the lump sum amount payable upon diagnosis of cancer can help in meeting treatment costs such as chemotherapy, blood transfusions, related medicines,  and hospitalization expenses. Additionally, cancer health insurance plans offer coverage against various stages of cancer, be it early stages or major stages.

  1. Supplements your employee group policy

The coverage received under your employee group policy does not include critical illnesses. In an unfortunate event that you are diagnosed with any critical illness, you will have to pay your medical bills from your pocket. Investing in a critical plan, therefore, offers enhanced coverage.

  1. Acts as an income replacement

Contracting a dread disease may leave you unable to perform your regular work duties. The sum assured amount received upon diagnosis acts as an income replacement, allowing you to meet your financial obligations rather easily. This acts as a huge savior if you are the breadwinner of the family.

  1. Quick assistance

Some insurance providers, such as Bajaj Allianz Life, provide the support and assistance of a health administration team. The team, consisting of paramedics and doctors, help with all healthcare-related services. Besides, they provide quicker claim settlement as there is a single point of contact. The team is also responsible for resolving queries in a quick and effective manner through systematic redressal mechanisms. You may avail of such benefits from your critical plan.

  1. Covers health checkup costs

Many are unaware of this, but many critical plans offer free health checkups. This allows you to get yourself checked regularly, without withstanding the worst of high medical test costs.

  1. Tax benefits

Are you looking to reduce your tax liability? If yes, then a critical cover is an ideal option. Under the guidelines stipulated by the Income Tax Act, 1961, you may seek tax deductions up to INR 25,000 towards your premiums. Senior citizens may avail of a higher limit of INR 50,000 under Section 80D, as compared to the previous limit of INR 30,000. This helps you lower your taxable income significantly.

A critical illness cover may be purchased as a standalone plan or as a rider to an existing mediclaim policy. For this purpose, you may compare health insurance plans and opt for the one that provides critical cover as an add-on. You may analyze the features, benefits, and scope of coverage before signing on the dotted line. Doing so will help you gain the most from your plan in case tragedy strikes.

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

Join The Discussion

%d bloggers like this: