Health Policy Rider In Term Insurance

Term insurance can also pay for health emergencies. The critical illness rider in term insurance pays an amount ranging from ₹5-25 lakh on diagnosis of certain illnesses and the term insurance carries on after the payment. Term insurance is a tool to insure future earnings potential of a policyholder. A critical illness can sometimes knock off a portion of the earnings based on its criticality or the financial implications. This rider is a tool to hedge a portion of the cost with health insurance being the main bulwark of protection. We illustrate the difference between the two and the options available in the term insurance products.

Term and health insurance

As mentioned health insurance is the primary tool.

The critical illnesses that the rider generally address is a list of 20-60 illnesses. These are pre-determined, and the severity is also described in detail to qualify for the lumpsum payment. But health insurance covers all health ailments in its coverage. The policyholder is not positioning himself for protection against few illness but buying a total cover with health insurance.

Health insurance as a product is designed to handle health issues and this includes critical illnesses too. The claim processing, network hospital coordination, pre- and post- care costs, coverage limits are defined and flow smoothly. The critical illness benefits provided by term insurance are an adjacent function and should not be relied upon in a tight situation.

But the rider has its advantages too when utilized as a complement to existing health insurance.

In specific instances when the critical illness rider is triggered, a lumpsum payment can be expected without the processing time involved in health insurance. This payment is not tied to the hospital or the treatment procedure, which allows greater flexibility in responding to the situation with the cash in hand. In case the policyholder is the primary breadwinner, the stop-gap payment can help tide over loss of income in the short term. When combined with the cashless treatment availed under health insurance, critical illness payout can smoothen financial hurdles.

One more advantage of such riders is that the premium paid is frozen at the time of policy issuance. Health insurance is a yearly contract, and policyholders should expect a sharp rise in premiums every half a decade. But as term insurance is a one-time contract and as critical illness is a part of that, the premium costs are frozen.

Rider as an option

Critical illness is essentially an add-on rider. It is not part of the base policy and can be acquired at a cost along with the yearly premium. The cost of the add-on is dependent on the sum assured under the head. Critical Illness benefits, across policies, starts off from ₹5 lakh sum assured. This costs around ₹2,000 – 3,000 per year. The higher end can reach upto ₹25-50 lakhs. Aditya Birla add-on rider with a sum assured of ₹50 lakhs costs around ₹20,000 per year.

Policyholders have recognize that the lumpsum payment is an accelerated payment. This implies that the death benefit gets adjusted for the amount paid under the critical illness head when the death benefit gets triggered.

Critical illness rider comes with a pre-determined list of illnesses that will be covered under the rider. Bajaj Allianz has recently launched the critical illness rider offering three different packages covering 10/25/60 indications under critical/enhanced/comprehensive heads.

Policyholders should read the document that covers the disease and should also get a fair understanding of the specific clauses related to each condition. For instance, cancer is covered by most such riders, but the conditions mentioned only malignant cancers being considered. Non-malignant or non-invasive cancer may not be eligible for the lumpsum payment.

The rider can be viewed as a financial booster in order to face especially tough health conditions. But policyholders should ideally only use this rider as a compliment to existing health insurance and not as a replacement.