Over the last few years, India has witnessed an increased growth of health complications that may take a critical turn into becoming fatalities. On the other hand, if tended to appropriately with cutting-edge medical healthcare services, patients can recover from these conditions. Subsequently, there has been an increased penetration of both term insurance policies and health insurance plans.
While health insurance policies tend to meet the medical financial requirements of an individual, term insurance plans cater to a family’s future financial goals in the case of an unfortunate demise of the policyholders. Today, we will be looking into how term insurance plans can come to the rescue when you deal with critical ailments.
Now, term insurance policies are an affordable channel to safeguard your family’s finances in the foreseeable future in the event of your unfortunate absence. Policyholders prefer term insurance plans over any other type of life insurance product primarily for a few reasons: affordable premiums, extensive coverage, locked-in premiums, 0 associated risks because it's a non-market-linked product and more.
While all of this makes vanilla term insurance policies a lucrative channel, if you add value-worthy add-ons like critical illness riders into the mix, you get a solid plan that is tweaked to meet the customised medical and financial requirements of the policyholders. Hence, there is a growing popularity of critical illness riders in terms of insurance plans.
Here’s a deeper dive into the details of critical illness add-ons in term insurance policies -
What are Critical Illness Riders in Term Insurance Plans?
Critical Illness Riders in term insurance policies are value-worthy riders that extend funds to policyholders when they are diagnosed with one of the critical ailments listed by the term insurance provider in the policy document.
Critical illness riders in term insurance policies are generally of two types -
- Standard critical illness riders - In this case, upon being diagnosed with any of the listed critical diseases, the policyholder receives a substantial fund that is over and above the base sum assured.
- Accelerated critical illness riders - In this case, the policyholder, if diagnosed with a critical ailment (one of the listed diseases), receives access to a fund that can be used at his/her discretion. However, the fund so obtained is a part of the base cover amount, which means that the beneficiary should expect a reduced amount when the insurer disburses the death benefit.
Needless to say, the cover amount offered in the case of a critical ailment can be capped at a maximum of the cover amount. This assigned fund varies from one insurer to the other.
Such riders in term insurance are a priority and help you decide which term insurance plan you need to avail. More often than not, you can find term insurance plans with different variants based on the number of critical ailments covered.
Should You Opt for a Term Insurance Policy with Critical Illness Rider?
In general, critical illness riders are among the highly recommended riders when choosing a term insurance plan. However, while we recommend this rider, you need to weigh out the pros and cons of this rider and decide for yourself whether you want to purchase this rider or not.
- What are the Pros of Critical Illness Riders in Term Insurance Plans?
- Act as an income replacement - When you are diagnosed with a critical illness, your focus is completely shifted to recovering from the disease, getting proper treatment, and such similar directions. Naturally, your source of income is severely compromised, which becomes a significant hurdle for your family and their short-term and long-term financial goals. Subsequently, with a critical illness rider in your term insurance policy, you gain convenient access to a substantial amount that can be used at your discretion.
- Tax benefits — If you have opted for a critical illness rider in your term insurance plan, the premiums you pay towards your base plan and the rider both have tax benefits under Section 80C and Section 80D of the Income Tax Act.
- Nominal premium spike - Critical illness riders in term insurance pile a very nominal addition on your base premium. Yet, this small spike in premium paves the way to gain access to a considerable amount that can be utilised when you are diagnosed with a critical ailment.
- Emergency funds during medical distress - With a critical ailment directed towards your health, any medical treatment, second opinions, healthcare procedures, diagnostic tests, and pharmacy bills can take a hit at your savings. And since your source of income is compromised, this hit at your savings means that your family will also suffer the financial consequences. Hence, you need a rider like critical illness in your term insurance policy to extend emergency funds upon the diagnosis of an ailment listed under your term insurance policy.
2. What are the Cons of Critical Illness Riders in Term Insurance Plans?
- Chances of base sum reductions - In most cases, a term insurance provider offers you options in your critical illness rider - accelerated and standard variants. However, if an insurer offers you just the accelerated variant of critical illness riders in term insurance plans, you are looking at a fund that is a part of your base sum assured. Hence, when the policyholder ultimately passes away, the beneficiary will receive a reduced base sum, which might prove to be a major hurdle when dealing with one’s financial future life goals.
Hence, critical illness riders have become a major consideration when choosing term insurance policies because they are affordable, value-worthy, and extremely lucrative. Based on this rider, here’s a look at some of the best term insurance policies with critical illness riders -
What are the Best Term Insurance Plans with Critical Illness Riders?
- Max Life Smart Secure Plus - This is an excellent choice from Max Life, one of the largest private insurers in the country. It’s a comprehensive and affordable term insurance plan that offers numerous perks, including:
- Accidental Death Benefits
- Zero Cost Term Plan Options
- Option to boost coverage to match inflation
- Waiver of Premiums in case of accidental total and permanent disability or the diagnosis of a critical illness
- Critical Illness Rider
- Top-up option to increase coverage after policy purchase
- Total Permanent Disability Rider
- An in-built terminal illness rider
- Maturity benefits through premium returns
This plan is also an outstanding term insurance option for smokers, offering lower premiums for smoker profiles compared to others in its category.
Drawbacks: While the terminal illness benefit is an in-built perk, insurers do not disburse the complete sum assured upon the diagnosis of a terminal ailment (with a poor prognosis and a few months to live as declared by the doctor in writing). Instead, they only pay out a portion of it.
2. Bajaj Life Smart Protect Goal: This is a solid choice from Bajaj Allianz Life. The Smart Protect Goal is a largely comprehensive policy that provides various benefits, including:
- Accidental Death Benefit
- Adjustment of the total sum assured to account for inflation
- Critical Illness Rider
- Total and Permanent Disability Rider
- Maturity benefits through premium returns
However, this policy has some drawbacks that raise questions about its suitability.
Drawbacks: The Critical Illness Rider within the Bajaj Allianz Life Smart Protect Goal plan does not offer an Accelerated option. You can only opt for the standard CI rider variant, where the CI amount is in addition to the base sum assured. Moreover, this plan lacks a Zero Cost Option, terminal illness benefit, top-up option, or Waiver of Premium.
3. ICICI Prudential iProtect Smart: This term insurance plan with a critical illness rider is an excellent choice—it's affordable, comprehensive, and packed with features. The policy even offers lower premiums for policyholders who smoke. This is a significant benefit, considering smokers often pay premiums that are double those of non-smokers.
Key features include:
- Accidental Death Benefit Rider
- In-Built Zero Cost Term Plan Option
- In-Built Terminal Illness Benefit
- In-Built Life Stage Benefit Option
- In-Built Waiver of Premium in case of total permanent disability
- Maturity benefits in the form of premium returns (rider)
Drawbacks: The plan does not allow you to increase your base cover amount based on inflation and does not include riders for total and permanent disability. Additionally, the policy does not offer Accelerated options for its Critical Illness Rider; it only provides the standard option where the payout is in addition to the base sum assured.
4. HDFC LIFE Click 2 Protect Life: HDFC Life ranks among the top life insurance providers in the industry, boasting impressive credibility metrics over the past three years. The Click 2 Protect Life policy from HDFC Life is a solid choice for those seeking a term insurance policy with a critical illness rider. The plan offers several attractive features, including:
- Accidental death benefit rider
- Waiver of premium for critical illness and total and permanent disability cases
- Total and permanent disability rider
- Critical illness rider
- Maturity benefits through premium returns
Drawbacks: Unfortunately, the Click 2 Protect Life plan from HDFC Life offers limited features compared to other policies in its category. The plan does not include features such as a zero-cost option, terminal illness benefits, a top-up option, or an inflation-based boost in cover amount. Additionally, like most plans from HDFC Life's stable, this policy is also comparatively expensive.
5. TATA AIA Maha Raksha Supreme: This term insurance plan is one of the most affordable in the industry and has gained significant popularity among policyholders. TATA AIA boasts excellent credibility metrics across Claim Settlement Ratio, Amount Settlement Ratio, and complaint volume, which, combined with its robust lineup of features, give it a competitive edge over other plans in its category.
The TATA AIA Maha Raksha Supreme policy offers additional benefits such as:
- Accidental Death Benefit
- Waiver of Premiums in case of accidental total and permanent disability diagnosis of a critical illness
- Critical Illness Rider
- Total Permanent Disability Rider
While the plan rarely presents any drawbacks, there is one restriction that potential policyholders should consider before opting for this plan.
Drawbacks: The insurer might pose a slight hurdle, considering TATA AIA’s recent issues over operational efficiency. Also, the plan is only available for those with an income slab of over ₹15 lakhs/annum and opting for a cover amount of more than ₹2 crores.
Conclusion
Term insurance plans are an incredibly popular life insurance product. While vanilla variants of these policies are already appealing owing to their affordability, if you are looking to make your penny’s worth, you need to choose some ideal riders, which include Critical Illness Riders. Apart from that, you can also opt for add-ons like Waiver of Premiums, Accidental Total and Permanent Disability Rider, Increasing/Decreasing Cover options, Life Stage benefits, and more. On the other hand, merely opting for these riders isn’t an option; you need to compare the term insurance policies and decide upon the best variant for the riders.
