Critical Illness Rider Or Standalone Critical Illness Policy - Which Is A Better Option?

A critical illness can strike anyone, and it can impact your financial stability adversely. Any serious illness, sickness, disease that impacts a vital organ, is life threatening and irreversible can be classified as a critical Illness. This includes heart disease, stroke, cancer, kidney failure, liver transplant etc.

A critical illness may force you to quit your job owing to your continuous treatment schedule. Besides losing your earnings, you will also see a significant rise in the costs of treatments, medicines, routine doctor visits, and lifestyle changes like modifying your home to accommodate a wheelchair or installing oxygen tanks - many of which are not covered by health insurance.

Which is why you should invest in a critical illness cover. It acts as income replacement and covers healthcare and other costs related to lifestyle changes, home modifications, etc.

When it comes to buying a critical illness cover, you have two options to choose from -

• A Critical Illness Rider as an add-on with a term/ health insurance plan, or
• A separate Standalone Critical Illness Policy.

Let’s see how they compare.

What Is A Critical Illness Cover?

A critical illness insurance policy can protect you financially if you’re diagnosed with a listed serious disease. This cover provides you a lump sum amount that can be used to cover medical expenses, such as long-term medical treatments, medical equipment for assistance etc.

Furthermore, if you are the primary breadwinner, the lump sum from your policy shall serve as an income replacement for your family.

Now, you can purchase critical illness insurance in two ways -

Critical Illness Rider With A Base Term Or Health Insurance

Critical Illness Riders are available with many insurers as add-ons to health insurance and term insurance. Add-ons are optional covers that can be added to your base policy at a certain extra cost with no additional paperwork.

• Health Insurance

In health insurance the critical illness cover is listed as a separate sum assured when you purchase this add-on.

• Term Insurance

In term insurance, a critical illness rider can be of two types based on the policy.

1. Comprehensive Critical Illness Rider
2. Accelerated Critical Illness Rider

Having a clear understanding of the differences between the two types of riders will help you avoid being caught off guard when it comes to claims.

Let's understand these two types in detail.

Comprehensive Critical Illness Rider

The Comprehensive Critical Illness Rider provides additional coverage. If you make a claim, the cover amount from this rider will be paid to you, while your base term insurance cover will remain untouched.

For example: Latha buys a term insurance with a cover amount of Rs 1 crore and a comprehensive critical illness rider worth Rs 20 lakhs. She gets diagnosed with 3rd stage ovarian cancer and requires immediate treatment. When she files a critical illness claim, she receives Rs 20 lakhs from the rider with which she can manage her medical expenses and other financial needs. In case she passes away during the policy period, her nominee shall get death benefit of 1 crore from her term insurance.

Accelerated Critical Illness Rider

The rider is a part of the base coverage you purchase and is credited to you as an advance from the base policy cover. A claim would result in this amount being paid to you and an equivalent reduction in your term insurance cover.

For example, Megna buys a term insurance with a cover amount of Rs 1 crore and an accelerated critical illness rider worth Rs 20 lakhs. She gets diagnosed with advanced heart failure and needs immediate surgery. When she files a critical illness claim, she receives Rs 20 lakhs from the rider with which she can manage her surgery costs, medical expenses and other financial needs.

In case she passes away, her nominee shall receive the death benefit.

Death benefit = Rs 1 crore - Rs 20 lakh
= Rs 80 lakhs
In this case, her nominee shall receive Rs 80 lakhs as death benefit.

• Drawbacks Of Critical Illness Rider

  There Is A Limit On The Cover Amount

  Each of these riders has a limit on the cover amount. Rider premiums cannot be higher than the base premiums of the term insurance plan, as per IRDAI regulations. This constraint restricts the amount of coverage you can get.

  Early Stage May Not Be Covered -

  In many of the illnesses listed, only advanced stages of the disease are covered. For instance, first-stage cancer is not covered by all the rider options we checked.

• Standalone Critical Illness Cover

  Standalone Critical Illness cover is an insurance policy that you can purchase separately. With this policy, you can get better coverage for a long term covering early stages of critical illness as well.

  It is also important to note that standalone critical illness policies have their own drawbacks. Over time, these policies can become expensive, and you may need to take a medical exam to qualify for coverage.

  Hence, evaluate your options carefully before settling on one.

  Now that we know what both of these options offer, let’s discuss how they differ in terms of their features.

• A Quick Comparison: Standalone Critical Illness Policy Vs. Critical Illness Rider

  Let's break down the two types of Critical Illness insurance policies in more detail and see which one suits your needs best.

  Features	Critical Illness Rider	Critical Illness Standalone Policy
  Base Plan	A term or health insurance plan must be purchased first.	This cover is available as a separate policy.
  Coverage Constraints	A rider's premium cannot exceed the base premium of a term insurance policy. Furthermore, there is also a limit on the Sum Assured, which cannot exceed a certain percentage or has a fixed value.	No such restrictions on the cover amount. You can pick the amount according to your requirements.
  Illness limit	Many illnesses are only covered at advanced stages.	Specialised plans may cover all stages of the disease.
  Medical Tests	The medical tests you undergo while purchasing your basic health coverage or term insurance will suffice. No additional tests are required.	You will need to undergo a separate set of medical tests, as required by the insurer.
  Documentation	You may not need to provide any additional documents other than what you have already provided for the base plan.	You'll have to provide the necessary paperwork - since it isn’t linked to any other plan.

• What Should You Pick?

  The decision entirely depends on your own needs. So -

  If You Want Adequate Coverage

  A standalone critical illness policy is your best bet if you want comprehensive coverage. In spite of the fact that it is a bit pricey and may entail additional documents and medical reports, this plan covers a wide variety and stages of illnesses.

  If Ease Of Use And Cost Matter

  You can choose a Comprehensive Critical Illness Rider. With this plan, you can reap benefits roughly equivalent to a standalone policy for a fixed premium throughout the entire term of the policy.

Summing Up!

Now that you know the difference between a Critical Illness Rider and a Standalone Critical Illness Cover, we are sure you can go ahead and decide which one is a better fit for you. Ensure you read your policy wordings carefully to learn the scope of coverage and the benefits associated with it.