Term Insurance

Explained: The Difference Between Critical Illness Health Plan and Critical Illness Rider in Term Plan

Nov 26, 2021

Ever wondered what would happen if suddenly one day you or any of your family members are diagnosed with a critical illness like cancer? Something as serious as this is surely a cause for concern. After all, medical expenses necessary for the treatment of critical illnesses are on the rise nowadays. Therefore, your financial plan must include an insurance policy which can be of use to you and your family under such unforeseen circumstances.

A critical illness health insurance policy can come to your rescue during tough times like these. Even if your savings fall short, a critical illness health plan can be your saviour. A term plan with a critical illness rider may also prove to be beneficial. In fact, it can be a great alternative to a critical illness health plan.

So, let’s take a look at the following sections to find out the differences between critical illness health plans and term plans with a critical illness rider.

Critical Illness Health Plan

To begin with, let’s find out what a critical illness health plan is. A critical illness health plan is a type of health insurance policy. It assures the insured a lump sum amount in case they are diagnosed with a critical illness included within the purview of the plan. Unlike typical health insurance policies, a critical illness health plan covers only a few critical health conditions. 

For example: A 30-year-old man chooses to buy a critical illness health plan with a tenure of 30 years. The sum assured as stated in the plan is INR 80 lakhs which will be paid to him only if he is diagnosed with cancer. He can use the amount for the purpose of his treatment.

Age 

Gender

Sum Assured (INR)

Policy Term (years)

30

Male 

80 lakhs

30

The medical conditions covered under these plans vary from one insurance company to another. Generally, a critical illness plan covers the health conditions listed below:

  • Heart attacks
  • Stroke
  • Organ transplant
  • Bone marrow transplant
  • Cancer 
  • Renal/ kidney failure
  • Paralysis
  • Loss of speech
  • Hearing impairments, and so on.

Illnesses such as these require extensive medical care and treatment. Their treatment can cost a lot. A critical illness health policy can help you meet all the exorbitant expenses in case you or your dear ones are diagnosed with a critical medical condition. These policies are available at low costs. Besides, the money can be put to some non-medical uses as well. These non-medical expenses include transportation costs, child care costs, etc. and these expenses are not covered by traditional health insurance policies.

But, these plans provide coverage only in case of a limited range of illnesses. If the illness that you are diagnosed with is not included in your policy agreement, you are unlikely to receive any benefit. Most insurance companies do not cover the following conditions:

  • Illnesses resulting from self-inflicted injury
  • Any illness caused by substance abuse say, consumption of alcohol
  • Complications resulting from plastic surgery or obesity-related treatment
  • Illnesses related to congenital diseases
  • Health issues resulting from HIV infection

Besides, you must satisfy a host of other criteria as mentioned in the agreement to receive the money. For instance, certain types of cancer may not be covered by the policy. In case of a relapse, you won’t receive any money either. 

Critical Illness Rider in a Term Plan

For those who don’t know, term plans are life insurance policies which are meant to provide financial security to your family in case something happens to you in future. If you opt for a term plan, you will be able to ensure financial security for your family when you will no longer be present. However, if you survive the policy tenure, you will receive no money. Term plans often come with additional benefits known as riders. One such rider is the critical illness rider.

A critical illness rider provides an additional benefit to the policyholder if they develop any critical health issue during the policy period. These conditions include heart attacks, strokes and so on. This rider provides the policyholder with the money required for treatment. In case of issues like paralysis, they provide a stable income to the policyholder. It is essential to avail of a critical illness rider when you’re buying a term plan. 

But, you need to pay an additional premium if you add a critical illness rider in your term plan.

For example: A 30-year-old man chooses to buy a term plan with a cover of INR 80 lakhs and a tenure of 30 years. He also chooses to add a critical illness rider in his policy which covers 36 critical health issues. In case he is diagnosed with, say, cancer during the term, he will receive a lump sum amount assured in the rider which he can spend for his treatment. Let’s say the amount assured in the rider is INR 50 lakhs. The term insurance plan will continue to exist, minus the rider, even after the diagnosis.

Age 

Gender

Sum Assured (INR)

Policy Term (years)

No. of critical illnesses covered

Sum Assured in the Rider (INR)

30

Male

80 lakhs

30

36

50 lakhs

The critical illness rider covers the following illnesses and a host of others too:

  • Heart failure
  • Cancer 
  • Paralysis 
  • Organ transplants
  • Kidney failure

However, you should keep the following things in mind while considering Critical Illness Rider in a Term Plan:

  1. The sum assured in a critical illness rider is limited. Usually, the sum assured in case of a critical illness rider can be equal to the sum assured in your base term plan. But, if the sum assured in the base term policy happens to be more than the maximum sum assured in the critical illness rider, the rider’s coverage amount will be limited.
  2. Critical illness riders have a waiting period of 30 days after the policyholder is diagnosed with a critical illness. To receive the sum assured by the rider, the person has to survive this period. So, if the person dies within 30 days of their diagnosis, the amount assured in the rider will not be paid. Moreover, there is a waiting period of 90 days at the commencement of the policy. So, if the policyholder is diagnosed with a critical illness within 90 days, the amount assured in the rider will not be paid.

Difference between Critical Illness Health Plan and Critical Illness Rider in a Term Plan

The following table illustrates the main differences between a critical illness health plan and the critical illness rider in a term plan:

Critical Illness Health Plan

Critical Illness Rider in a Term Plan

  • Firstly, a critical illness health plan is a health insurance policy which is meant to provide the policyholder with a sum of money only if they are diagnosed with a critical illness covered by the policy. The money can be used by the policyholder for their own treatment or the treatment of their loved ones in case they are diagnosed with a critical health condition.
  • It is purely a health insurance policy. 
  • Premiums to be paid are quite low in case of these plans.
  • The sum assured in this plan is quite extensive.


 

  • To begin with, a critical illness rider is an additional benefit which a policyholder may opt for when buying a term plan. The rider assures the policyholder of a sum of money in case they are diagnosed with a critical illness covered by the rider. The base term plan minus the rider continues to exist even after the policyholder is diagnosed with a malady. 
  • It combines life insurance with health insurance.
  • The premiums tend to be a little more than the premiums to be paid for a policy without the rider.
  • The sum assured in a critical illness rider is quite limited.

Key Takeaways

As a consumer, you must always consider buying an insurance policy based on your financial or other needs. Diagnosis of a critical illness is quite life-changing and a lot of money is required when it comes to treatment of such maladies. If you choose to ensure financial security for your family in addition to a protection against financial crisis in the event of a diagnosis of a critical illness, you must opt for a term plan with a critical illness rider. Otherwise, you may opt for a critical illness health policy. But in any case, you need to be mindful of all the terms and conditions specified in the agreement paper so that you don’t have to deal with additional hassles when times get hard.

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