Difference Between Critical Illness and Terminal Illness Riders under Term Plan

An insurance plan is absolutely indispensable and that’s simply because life is full of uncertainties. Among all the insurance schemes offered to us by several insurance companies, term insurance is by far the simplest and most popular option.

A term plan is an insurance scheme which ensures financial protection to the beneficiaries of the policyholder in their absence. Plans such as these come with certain additional benefits known as riders, the benefits of which could be availed of if you choose to pay some extra amount of money as premium.

Of all the riders offered by different insurance companies, some are quite popular and their benefits are availed of by many. Two such riders are: critical illness rider and terminal illness rider. Now, the terms “critical illness” and “terminal illness” have widely different connotations.

As consumers, you need to be clear about the meaning of a critical illness rider and a terminal illness rider and the benefits they offer.

What is a Critical Illness Rider?

Certain health conditions or illnesses are quite serious. Even though they can be treated and cured, they require proper medical care and intensive treatment. These are known as critical illnesses. Heart attacks, cerebral stroke, paralysis, renal failure, etc. are some of the most common examples of critical illnesses. 

It is difficult for a lot of people to get proper treatment for critical illnesses as the ones we mentioned above. This is especially true of people who have a low income. Since treatment of such ailments requires a lot of money. 

So, what if someday you are diagnosed with a serious illness which requires immediate treatment? If you choose to add a critical illness rider to your term plan, you will be able to avail of the money when the need for the same arises.

If you opt for a critical illness rider with your term plan, it would be a prudent move on your part. 

A critical illness rider has the following features and offers you the following benefits:

1. You and your nominee(s) would be eligible to receive the amount of coverage assured in the rider if you are diagnosed with a critical health condition. You can use this money to pay for your treatment and meet other requirements. 
2. Besides, following your diagnosis, you might not be able to visit your workplace. As a consequence, you might lose your job. The money assured in the rider will provide you with a regular income.
3.  As many as 40 critical illnesses are covered by this rider.
4. It offers double tax benefits. The premium is eligible for deduction under section 80C, section 80D as well as Section 10 (10D) of the Income Tax Act of 1961.
5. There is no minimum survival period.
6. Claims arising within 90 days from the inception of the policy are rejected.

For example, Avinash has invested in a term plan with a cover of INR 1 crore. In addition to buying a term plan, he has opted for a critical illness rider offering a sum of INR 20 lakh in case he is diagnosed with a critical health condition someday.

A few months later he suffered a cardiac arrest and had to undergo a major surgery. He received the INR 20 lakhs which was promised under his critical illness rider. With the money, all his medical expenses could be covered. So, with regard to his surgery and subsequent treatment, his family did not have to suffer much, from the financial and economic perspective.

What is a Terminal Illness Rider?

Some diseases can never be cured. No matter how painful this fact maybe but certain illnesses do not have any remedy as of now. Such diseases or illnesses are known as terminal illnesses. Cases of terminal diseases are on the rise these days.

If suddenly you find out that you have only two months of your life left owing to an incurable malady, won’t it be shocking for you? This might even leave your family unsettled. The fact that they will probably fail in their attempt to save you would be an agonizing discovery for them. But, they might feel even worse if they cannot even afford to provide you with treatment to lessen your pain.

Under such circumstances, a terminal illness rider or an accelerated death benefit might be of some use to your near and dear ones. This rider is also known as “living benefit”. 

Let’s assume that the policyholder is diagnosed with an incurable health condition and is likely to pass away within about 6 to 12 months following the diagnosis. Now, he had added a terminal health rider to his term policy. So, his nominee(s) would be eligible to receive the assured sum. But, the payment will be made only after a registered medical practitioner certifies the diagnosis. Some insurance service providers charge no additional amount from policyholders who opt for this rider.

For example, Pravin has bought a term plan with a coverage of INR 2 crore. Now, he had added a terminal illness rider to his base plan with an assured sum of INR 20 lakhs. 

Almost a year later, it was discovered that he had touched the final stage of liver cancer. Soon he passed away. But because he had opted for the terminal illness rider, his family did not have to suffer on financial grounds.

Difference Between Critical Illness Rider and Terminal Illness Rider 

The following table shows the basic differences between a critical illness rider and a terminal illness rider:

Key Takeaways

Before opting for one of these riders, you must carefully consider the financial requirements of your nominee(s) along with your own needs. A terminal illness rider seems to be a better choice since you can avail of the benefit often without paying an additional amount in the form of premiums. But it is mandatory to procure the requisite documents to avail of the benefits offered by a terminal illness rider.

But before opting for any rider, including a critical illness rider and a terminal illness rider, it is advisable to go through all the terms and conditions mentioned in the agreement paper of a policy.