Understanding Critical Illness Riders With Term Plans: Know The Payout Dynamics


You may already know about the indispensable nature of term plans and why they matter for every household and individual, especially those who are the primary breadwinners for their families. While term insurance offers a fixed payout in the form of the sum assured to the nominee of the policyholder in case of the latter’s demise within the policy period, you can also expand the scope of coverage by adding riders. 

Riders are add-ons that cover various other scenarios in return for an additional premium payment. Of course, you can always use a term plan calculator to calculate the premium payable for your desired coverage. There are many types of riders available, right from accidental death and disability to hospital care and even critical illness. The latter is a rider that several policyholders in the country are increasingly choosing as a part of their term plans. Here’s knowing more about these riders along with their payout dynamics alongside. 


Critical Illness Riders- Why They Matter

You can add critical illness riders to term plans to widen the scope of coverage. Critical illnesses may lead to a huge financial impact on any family, especially if the primary breadwinner is diagnosed with the same. This is because the costs of treatment can be extremely high, while there could be income losses and lengthy breaks from work alongside. Critical illness riders ensure lump sum payouts that enable families and policyholders to bypass financial difficulties arising from the treatment of prolonged medical ailments. 

This insurance plan ensures coverage for costs linked to critical illnesses, which are listed in the policy document. The payout of the rider does not also depend on the actual costs of treatment and other aspects. It can be used to make up for income losses, cover additional costs, and make payments for medical costs. The definition of a critical illness may vary across insurance companies and policies. Yet, the insurance regulatory authority, IRDAI, has already defined around twenty such health conditions which are classified as critical illnesses. This insurance add-on is highly essential since it will ensure greater peace of mind and quality medical care to the policyholder in case of any critical illness diagnosis. It may also help in covering illnesses and treatments which are not covered under regular mediclaim or health insurance plans. Other coverage aspects, like transportation, pre and post-hospitalization costs, etc., can be taken care of with this amount since they may not be covered under a regular health insurance policy. Patients who are terminally ill may use these funds to spend the rest of their lives with family and engage in activities that they are passionate about. 


Critical Illness Riders: Payouts and Other Aspects

Critical illness costs may vary based on factors like your lifestyle, age, and health conditions. For example, smokers usually have to pay higher in comparison to their non-smoking counterparts, while premiums for older insured individuals will be more than for younger insured customers. In addition, those with pre-existing health conditions such as diabetes may have to pay a higher premium. 

The payout dynamics are dependent upon the insurer in question, although in most scenarios, critical illness coverage enables a payout to the person insured once they have been diagnosed with a listed critical illness or the condition has been determined to be irreversible and chronic. In usual scenarios, the claims are processed within a period of 30 days after the submission of all the critical documents. 


Choosing A Critical Illness Rider- What Should You Keep In Mind? 

When you are choosing a critical illness rider with your term plan, you should always keep these aspects in mind: 

  • You should first evaluate and identify your requirements before comparing available riders
  • Always read the document carefully in order to get a better understanding of the inclusions and exclusions, along with the coverage aspects
  • You should check the list of critical illnesses covered in the policy document. If there are only a few limited illnesses on the list, then the plan may not be suitable for your needs. 
  • Ascertain whether the lump sum amount is sufficient to meet financial needs in terms of medical costs and loss of income
  • The waiting period should not be overly long or excessive
  • Check for any extra rider-related benefits and payout eligibility for relapses
  • Check the terms and conditions for payouts

If you lead a healthy life, the chances of being diagnosed with a critical illness can be on the lower side, which is good news, to say the least. However, the risks naturally increase as you get older. Hence, augmenting your term insurance coverage with a critical illness rider is always a good idea. In addition, it will be a major source of financial support for your family in case of any such future scenario.


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