Why Mediclaim may not be enough in a ‘critical’ situation

12th June 2017
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Most individuals have some sort of medical cover or Mediclaim and think it is all they need for health cover. This view is incorrect and turns out to be expensive in many ways.

First let us understand how Mediclaim works.

What is Mediclaim?

Medical insurance also called Mediclaim covers health / treatment expenses incurred on diseases or accidents.

Money is disbursed by the health insurance company based on actual treatment expenses subject to the health cover.

Let’s say Aakash, a 32 year old man meets with an accident. The treatment expenses costs Rs 1.5 lakhs. He will receive the entire amount, subject to terms and conditions, based on his health cover which stands at Rs 2 lakhs.

However, if Aakash were to be afflicted with say a heart ailment resulting in a hospital bill plus related expenses of Rs 4 lakhs, he will get a maximum of Rs 2 lakhs, based on his health cover. So Aakash has to fund the balance Rs 2 lakhs  by dipping into his finances.

Now if only Aakash had a life insurance policy with a critical illness rider, he wouldn’t be high and dry in the middle of an expensive heart treatment.

What is a Critical Illness Rider?

Life Insurance companies are known to offer riders on their plans – be it term plans, endowment plans or ULIPs (unit-linked insurance plans).

Riders act as add-ons to the primary insurance plan. The add-on is a supplementary cover that is triggered under certain conditions. The rider benefit boosts the overall life cover.

Typically, the critical illness rider covers illnesses like:

  • Alzheimer’s Disease
  • Benign Brain Tumor
  • Blindness
  • Brain Surgery
  • Cancer
  • Deafness
  • First Heart Attack of a specified severity
  • Kidney Failure requiring regular Dialysis
  • Major Head Trauma
  • Major Burns
  • Multiple Sclerosis
  • Permanent Paralysis of limbs
  • Parkinson’s Diseases
  • Stroke
  • Aorta graft surgery

These are some of the more common critical illnesses. It is best to verify with the insurance company (or the agent) for specific illnesses and features since various insurers have varying rider terms.

Critical Illness Riders Vs Mediclaim

There are many ways in which the critical illness rider is NOT the same as Mediclaim:

  1. The critical illness amount is disbursed whether or not the policyholder – Aakash, in this case – undergoes treatment. Disbursal is subject to incidence of the defined critical illness, not actual treatment. With Mediclaim, the policyholder must be hospitalized and present proof of expenses for disbursal.
  2. The payout on the diagnosis of the critical illness is based on the life cover regardless of actual expenses. Assume Aakash has bought life cover of Rs 1 crore that has a critical illness rider attached to it. On undergoing heart surgery, Aakash will be disbursed 75% of the sum assured or such amount as based on the terms and conditions of the insurance plan and attached riders. Thus, Aakash would get as much as Rs 75 lakhs for a heart surgery costing much less. Mediclaim disbursal is linked to actual expenses and health cover ceiling, hence, Aakash is eligible for Rs 1.5 lakhs only as illustrated earlier.
  3. Even after claiming critical illness rider proceeds on a heart ailment, the policy as also the rider continues to be in force. This means that Aakash can claim benefit on being afflicted by another defined critical illness.

Mediclaim is in force till the time there is residual health cover. Once Aakash has exhausted his Mediclaim cover for a particular year he can no longer claim benefit in that year.

Takeaways for Aakash

  1. Aakash must buy a life insurance plan if he hasn’t done that already. The amount must represent the sum total of his lifestyle and family expenses, outstanding loans, children education and so on.
  2. He must look at term plans while zeroing in on the right insurance plan. Term / pure life plans have affordable premiums which allows the insured to go for a larger life cover that is truly representative of the family’s needs and financial obligations.
  3. There are new age term plans that are aimed at busy individuals like Aakash. These plans can be purchased online at the touch of a button. They discard time consuming and burdensome medical tests. And they are a boon for the health conscious with discounts on premiums for non-smokers.
  • The plans offer helpful riders like critical illness, waiver of premiums, among others, that can enhance the cover and boost the family’s finances at critical junctures.

Bajaj Allianz Life eTouch Online Term Insurance Plan, is a regular premium payment, pure term and health cover plan. The plan provides life cover combined with benefit on accidental death, accidental total permanent disability & critical illness and benefit of waiver of premium, depending on the variant opted by you. This 3-in-1 plan gives the comfort of a complete protection solution aimed at covering against all 3 D’s – Death | Disability | Disease at a competitive price point , with the flexibility to choose from a 40 year long term and a simple 3 step buy process.  This is the 1st plan in the market which offers Waiver of Premium on Accidental Permanent Total Disability Cover and Critical Illness Cover in its Shield Supreme Variant. Also, in case of an unfortunate event, the nominee can opt to take the claim settlement benefit in five customizable options like equal or increasing monthly instalments or partially in lump-sum & balance in instalments.

Bajaj Allianz Life Insurance company has one of the best claim settlement ratios of 98.1%* and solvency ratio 793%# and is one of the most preferred brands to invest in for a JiyoBefikar future.

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