Where life insurance meets health insurance: Critical Illness CoverTerm life insurance is, in most cases, the best type of life insurance on offer. It pays out only on your death and has no maturity value.

However, in return, the cover it offers is typically 10 times the cover in traditional ‘endowment’ life insurance policies and ULIPs (Unit Linked Insurance Plans). For example, a premium of Rs 50,000 per annum will get you a roughly Rs 5 lakh cover in endowment policies or ULIPs. However, the same premium will get you close to a Rs 50 lakh cover in term life insurance.

The ‘wasted premium’ problem

To many people, ‘getting nothing back’ if they survive the policy term of the life insurance policy (which can extend to 70/75 years) is a ‘loss.’ They find it hard to stomach the idea of losing all those premiums even, in a sense, they have won by surviving the term. The idea of protecting their family in case of their own demise has also been fulfilled. In response, the life insurance industry has come up with a winning formula – offer critical illness cover alongside a term life policy.

What is critical illness cover

Critical illness cover pays out when you are diagnosed with an illness specified in the policy. These policies will typically cover illnesses like heart attacks or kidney failure. Several types of cancer are also covered.

A critical illness ‘add-on’ or ‘rider’ will pay out whether or not you die. It is thus in effect a health insurance policy rather than a life insurance one. The tax deduction on these riders is also granted by Section 80D which covers health insurance (up to Rs 20,000 per annum without medical check-up) rather Section 80C which covers life insurance (up to Rs 1.5 lakh per annum).

With some insurers, these two covers are bundled together and one cannot be purchased without the other. Other insurers offer them as optional add-ons or riders.

Who is offering it

SBI Life Poorna Suraksha and ICICI Prudential iProtect Smart offer critical illness cover. Click here to read more about SBI Life Poorna Suraksha and here to know more about ICICI Prudential iProtect Smart.

Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.