You don't need insurance only when you die

Everyone thinks that they need insurance only when they die, but in fact, you need more insurance when you live. Surprised?

It might be surprising, but is it very true.

In case of death, the expenses are for the remaining family only. But in case a person survives, say a massive heart attack or paralysis, the expenses zoom. This includes the day-to-day expenses of the family as well as the medical expenses of the patient, which can be very high.

The hospitalisation expenses can obviously be taken care of by the mediclaim policy bought by the insured, but in case of critical illnesses like these, the costs after hospitalisation also may be huge. The cost of medicines and diagnostic tests 60 days after hospitalisation is normally not included in mediclaim policies.

Sometimes these costs can be high enough to make a huge damage to finances. Also, the income normally stops or is significantly reduced when the main wage earner is affected. Thus it is a double whammy of troubles.

In a recent article, I read that India may soon become the heart attack capital of the world. What was also stated is that with major improvements in medical infrastructure most of us will survive the heart attack.

It is to address the needs of such a person that critical illness policy is required. Probably many of us wouldn't have heard of such a policy being available in market. But a critical illness policy pays you lump sum money if you contract the specified critical illnesses such as organ failure, stroke, paralytic attack and multiple sclerosis etc.

This lump sum enables you to earn some income by investing this sum in any appropriate instrument so that this income can act as a substitute to the income that is lost due to the illness. That is why critical illness is also part of what are broadly known as income protection plans. Therefore typically your critical illness cover should be at least as much as your life insurance coverage. But very few people are even aware of such plans, let alone take them.

For one, Critical illness plans tend to be much more expensive than a term plan simply because the probability of suffering from a critical illness and surviving is far higher than the possibility of death during the policy term.

A critical illness policy can be bought in two forms, either as a rider to a life insurance plan or a stand-alone policy from a general insurance company. A rider is anything, which is bought along with a normal life insurance plan, on payment of extra premium.

This is the best way of getting critical illness cover if you are also simultaneously buying term cover, as the premium for the rider normally remains constant over the tenure of the policy.

However, you will not be able to buy adequate cover in this manner because of a guideline that restricts the premium payable on such rider to a maximum of 100 per cent of the base term insurance premium (it is 30 per cent of the base premium if you are buying the critical illness rider on top of a traditional or ULIP policy). As the critical illness cover is expensive, this results in the critical illness rider being for a fraction of the sum assured. This results in inadequate coverage.

So for your balance needs or if you already have enough term cover (you need to buy the rider at the time you buy the term policy since no life insurance company allows riders to be attached in later years) you will necessarily need to buy this as a stand-alone critical illness policy from a general insurance companies.

Here you will get yearly policies, which needs to be renewed every year. The premium can go up as your age goes up.

List of a few insurers, which offer critical illness policies, are listed below.

Thus if the sum assured from one company is not enough to provide for your coverage needs then you have no option but to buy policies from multiple insurance companies and cover yourself to the maximum limit possible.

Perhaps, if the guideline restricting the rider premium to 100 per cent of the base term insurance premium is relaxed then some life insurance companies will probably start offering critical illness riders for higher amounts as well. This will help all of us to cover ourselves appropriately in case of any critical illness  and help us to face upto life after disease.