The Importance Of A Critical Illness Policy
Dalal Street Investment Journal|May 10, 2021
Like life and health insurance, having critical illness insurance is equally important. This is because neither life nor health insurance provides coverage for many of the critical illnesses. Moreover, health insurance would not cover more than hospitalisation expenses. It will fail to cover loss of income that you may face due to the longer time you spend during recovery

The recent pandemic has taught us a lot of personal finance lessons. It has certainly awakened us to the importance of having life and health insurance. The insurance sector in India has very low penetration when compared with the global average. Even in insurance, only life and health-related insurance plans are the most sold products. Further, a majority of those who buy life and health insurance do so from a tax saving perspective and not as a risk containment necessity. That is because premiums of life insurance are eligible for deduction of up to ₹1.5 lakhs under Section 80 C while health insurance premiums are eligible for similar deduction of up to ₹25,000 under Section 80 D of the Income Tax Act.

However, it is high time people should understand the actual purpose and importance of having them both. As said earlier, the penetration of life as well as health insurance is low in India and therefore looking at critical illness insurance penetration would be pointless. It is bound to be quite lower than that of life and health insurance. However, ignoring critical illness insurance cover can also burn your pocket. The general argument could be that with health insurance in place, is there a need for critical illness insurance? There is, simply because there are some illnesses that are not covered by health insurance policies.

In order to have a better perspective, let us take the example of a couple, Rahul Shah and his wife Anjali. Both are IT professionals from Pune and have achieved quite a lot in life. However, there came a day when Rahul was diagnosed with brain tumour. Their health insurance policy covered only hospitalisation expenses. But such was the illness that it made Rahul incapable of continuing with his work. This burdened the couple with a financial disruption because they did not have a critical illness insurance plan in place that could work as an added safety net.

There are many couple like these who are unaware of the benefits of having a critical illness insurance policy. Therefore, in this article we will understand what a critical illness policy is, how is it different from a normal health insurance plan and the benefits and importance of having critical illness insurance. Apart from this, we would also understand whether to go for a standalone critical illness policy or opt for a rider that is available with your life and health plans.

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