All about a Critical Illness policy

critical illness policy

Critical illness as the very name tells that the illness which needs immediate medical attention. In medical terminology, it is that illness which, many times lead to severe deterioration of physical/mental health of the patient. Diseases like Heart attack, Cancer, stroke etc. come in this category.

Where these illnesses prove very bad for physical health, there it also worsens the financial health of the person, as the cost involved in the treatment of these illnesses is huge.

Many people are under impression that that costs related to the treatment of critical illnesses cover under the medical or health insurance they are having.

But what they don’t understand is that what if the treatment does not involve hospitalization? And what if the treatment does not even come with the list of daycare treatments listed in the policy? So here through this article I am going to throw some light on the critical Illness Policies.

What is a Critical Illness Policy?

It is that Insurance policy where the insured will be paid the sum assured once he/she gets diagnosed with a particular listed critical illness, and once the claim is paid policy gets canceled. This is the defined benefit policy, where lump sum payment is made to the insured irrespective of medical expenses. Thus one can get the treatment done with the money received even if that is not demanding any hospitalization.

Critical Illness Policy -What it covers?

Most of the policies cover 7-10 critical illnesses. They are as under

  1. Cancer
  2. Coronary Artery Bypass Surgery
  3. First Heart Attack:- (Myocardial Infarction)
  4. Kidney Failure
  5. Major Organ Transplant
  6. Multiple Sclerosis
  7. Stroke
  8. Aorta Graft Surgery
  9. Paralysis
  10. Primary Pulmonary Arterial Hypertension


I don’t have any idea about much of the above but for treatment like bypass or kidney failure or organ transplant, I know the cost involved is huge. I am sure that others are also serious conditions which demand lot of attention medically and financially both.

 What does a critical illness Policy not cover?

Some Policies have specific exclusions, but many are common. I hereby list 3 conditions which are most important among all and insured should know about these.

  1. If the Critical illness is pre-existing at the time of buying the policy, then no company will cover the same.
  2. If the patient dies within 30 days of being diagnosed with such illness then no claim is payable.
  3. If the insured gets diagnosed with any Critical illness in the first 90 days of taking the policy, then also no claim will be entertained.

 Critical Illness Policy vs. Health Insurance Policy:

“I already have health insurance for me and my family, then do I need critical illness policy?” or “Do you mean that my health insurance will not pay for critical illnesses?” etc. these are a very common question which I come across when I explain the critical Illness policy to people. Well, the answer is yes. Critical Illness Policy and mediclaim or health insurance policy are two different policies.

  • Mediclaim is a reimbursement policy in which you will be paid back the expenses incurred on the hospitalization of the insured, whereas Critical Illness is the benefits policy where the lump sum amount will be paid to the insured after 30 days of survival after being diagnosed with the disease.This payment will be irrespective of the fact that whether the treatment has been started or not and whether it requires hospitalization or not.
  • Critical illness policy will get canceled for future claims once a claim is made, but health insurance will remain to continue irrespective of the claim.

But still, as both are related to the health of the insured so in many senses these policies are interlinked.

 How and from where to buy Critical illness policy?(also read – Review your insurace portfolio)

Critical illness policy comes in 2 variants. One as a Separate Individual policy and other as a rider attached to life insurance policy. Some Life insurance companies also offer a separate critical illness policy i.e. other than as a rider. Before selecting any of these, let’s understand where the difference is.

 A)     Premium: If taken as a rider to life insurance the premium of the critical illness benefit will remain same throughout the policy term but if taken as a separate policy the premium keeps on changing with the age or with the block of age as defined by the insurer.

 B)     Sum Assured: If taken as a rider the sum assured of critical illness will depend on the life sum assured.The premium of Critical Illness rider or all riders combined should not be more than 30% the total premium of life insurance. But in case of separate policy, you may get a sum assured up to Rs 50 lakhs.

 C)     Some innovative features.

There are few companies which have come up with some different feature which one must also consider before deciding on the purchase.

i) HDFC Life and ICICI Pru life has come up with products which cover around 30 critical illnesses. Though conditions apply to the coverage still the number of diseases are much high than the others.

ii) Apollo Munich Health Insurance offers Critical illness as a rider attached to its health insurance. But this rider is not one-time claim settlement rider, here insured can claim 3 times for different illnesses.

iii)  L&T health insurance doubles the sum assured in case a person is hospitalized with critical illness.

  What are the Tax Benefits?

As told earlier that Critical illness policy is an extended version of Health Insurance, The premium you pay towards it is tax deductible under Section 80(D) of Income Tax Act, 1961. Limit is Rs 25000 per financial year. For senior citizens, the limit is Rs. 30000 per financial year.

Deductions under section 80(D) is available over and above the deductions under section 80(C) that has a limit of Rs. 1.5 lakh. (Read – tax planning customized)


Should you Buy Critical Illness Policy?

A few days back Dr. Naresh Trehan, CMD, Medanta Medicity quoted in DNA that “India will become the world’s capital of heart diseases by 2015”. Nowadays, not only are lifestyle disorders becoming more common, but they are also affecting the younger population.

Hence, the population at risk shifts from 40+ to maybe 30+ or even younger. Already considered the diabetes capital of the world, India now appears headed towards becoming the lifestyle-related disease capital as well. Well, you will agree with the fact that health treatment costs are increasing day by day and along with that with our sedentary lifestyle, job and family pressures, unhealthy eating habits, not exercising etc. we are very much prone to many diseases.(Read – Review your insurance portfolio) 

All the above calls for an adequate cover for life, health, accident and critical illness, so that our financial Life should not get hit due to any unforeseen event. One should be adequately insured so that he/she can devote the quality time to other goals and responsibilities. But yes, as this policy is only one-time payment policy so those who have a good cash flow and can maintain or create a good corpus for medical emergencies, then they may avoid taking this policy.



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He’s MBA ( Finance) gold medalist, a CERTIFIED FINANCIAL PLANNER, Chartered Trust and Estate Planner and SEBI Registered Investment adviser. He has authored a Book in collaboration with CNBC TV 18 Network 18 bestesellers , tiltled "The Art of Being Good with Money". An ex banker , having a 17+ years of long experience in financial services industry he manages clients across the globe. He is a regular contributor to various leading Media and publication houses. He has written for Moneycontrol, Dainik bhaskar, Business standard, Live mint, Indian Express, The Tribune etc. He has also appeared in TV shows by Zee Business, ET Money, National Door darshan, Jagran Online. He also delivers training on Various personal finance topics to various corporate houses. You may get in touch with him at [email protected]


  1. Should anyone take a Critical Illness Cover? This insurance looks to me either useless or inadequate. For e.g. a Heart byapass surgery would be covered in normal health insurance. Liver transplantation costs around 40 lacs today. I think no one would take that much amount of CI (Pls check the premium). So to me it looks like CI cover is either useless or inadequate. Also the “30 days survival” clause in CI makes it worse. Not sure which CI does not require a hospitalization for treatment.

  2. Ram , i would not say it useless but yes many times it proves to be inadequate. Though this particular insurance is different from mediclaim. It comes into help if one survives for a particular waiting period with particular critical illness, to cover up the future medicines or treatment cost which may or may not be covered in mediclaim and also the income loss. I have seen 2 cases in my life where the persons got paralyses but is alive for the last 3 years. In these kind of situations CI policy do its job. but yes, in this situation 5 lakh or 10 lakh hardly matters, but still, something is better than nothing.

  3. […] Critical Illness is one of the most confusing and though must have cover in specific cases. As it is a onetime claim policy so it is advisable to those who cannot build a medical emergency corpus. Moreover do read the illnesses and medical conditions covered in detail through policy wordings before going for any policy. How much is enough will always be a debatable question. (Read : All about Critical Illness policy) […]

  4. Dear Mani,

    I am 28 yesars old and have 2 lacs medical insurance cover provided by my company. I would like to know whether is it required to take additional medical cover with critical illness or to go for critical illness cover directly? Further
    1) Is there any company that provides comprehensive health insurance that covers most of the critical illnesses offering sum insured for 10-15 lacs?
    2) Could u provide me the claim settlement ratios for Apollo, religare and Star?
    3) For only critical illness, which of these gives maximum coverage with cheap premiums for life long: Apollo, religare or Aviva?
    4) Among the apollo health insurance plans, which plan is cheaper and has wide coverage and suited for individual

    • Dear Arun

      First and foremost thing one should never be dependent on employer provided cover. One should always have adequate separate and individual health cover.
      All companies cover hospitalisation expenses due to critical illness. But if you want specific critical illness policy which makes a lumpsum payment after being diagnosed with illness and surviving for particular time frame, then that also is available with almost all health insurers even life insurers.
      – Chk out bajaj alliance, icici prulife crisis cover, and religare and apollo which offers 10-15 lakh of cover.
      – Health insurers doesn’t have readily available claim settelment data. You have to search it up with IRDA.
      – Health plans have different features which buyer has to understand first and buy the policy which is affordable with in the liked features. Check out the below link to figure out what needs to be checked in a health policy

  5. Dear Mani,

    Is it possible to transfer the health insurance covered by an X company to other companies like apollo etc?
    If so, which companies allow and provide a top up for more health insurance?

    • Yes this is possible. Every company allows it. It covers under portability feature. Approach a company where you want to move your existing policy to, atleast 45 days in advance. They will take care of the rest, by asking required documents from you.

  6. i have 3 company in Critical illness Policy
    Bharat AXA – 20 Critical illness – 5 lakhs
    Max bumpa – 20 Critical illness – 10 lakhs
    Cigna ttk – 30 Critical illness – 10 lakhs
    already health insurance 3 lakhs
    in case any claims heart attack claim 3 lakhs expenses i apply 3 company in Critical illness Policy claims processing or not ?

    • Feroz, health insurance and critical illness policy works differently. Where health insurance is indemnity plan in which you will be compensated with the amount of hospital expenses ( with in the limit of insurance cover), critical illness pays the lumpsum sum assured if the conditions of severity of disease and survival period are satisfied. You can apply to all companies if you have more than 1 critical illness insurance policy , but you can’t do this for health insurance/mediclaim

    • In case of heart attack, the hospitalisation expenses can be claimed from health insurance upto Rs 3 lakh. If due to heart attack, heart gets damaged upto specific severity and insured survives for next 30 days, then insured may claim from all critical illness policy.
      Health Insurance is an indemnity policy but critical illness pays in lumpsum once the insured health problem satisfies the policy conditions.

  7. Hi Manikaran,

    This ‘specific severity’ clause in the critical illness policies is worrying me. They are almost end-stage diseases to qualify under this specific severity, where there’s little chance of surviving. If one has an adequate term cover and rest of the money is invested appropriately for building a corpus (equal to standards cover these CI policies offer – 10/15L) that could take care of some of such critical illnesses where there’s a possibility of surviving then perhaps you may not need to go for this complicated product.

    What is your view on this, please? Am I missing anything here?


    • I totally agree with you. One needs to create and maintain one health fund from savings to take care of such situations.


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