Critical illness cover is an insurance product where the insurer makes a lump-sum payment to the policyholder in the event that s/he is diagnosed with a serious health related condition. A critical illness can result in loss of income, disability and can bring about several changes in one’s lifestyle. The financial burden caused by it far exceeds what a regular health plan will cover, and that is why having a critical illness plan is necessary.
When it comes to the question of how much critical illness cover one needs, it all comes down to the individual’s situation. An unmarried individual with no dependents requires lesser cover than a married person who has children. Additionally, anyone who has loans and other debts against her/his name should opt for higher coverage. Income received through pensions and investments should also be taken into account while determining the level of cover one takes.
Calculate the income you need
Look for plans where the sum assured is three times your current income. This is so that when you are diagnosed with some critical illness and are unable to work, the policy payout will take care of all your expenses for a couple of years. In case you have any debts against your name, the benefits will pay for that as well.
Calculate the expenses you will incur
Getting an estimate of the expenses is another method of determining the coverage you need. Total the monthly expenses you are likely to incur in case you are diagnosed with a critical illness. Take into account the hospital bills, recovery treatment costs and household expenses and multiply the final estimate with twelve and the number of years to intend to stop working. The cover that you choose must at least cover all your expense.
As you decide on the coverage amount, bear in mind the inflation rates. Without factoring in future inflation levels, you could end up with a policy that only meets a fraction of your future expenses.
Finally, don’t forget to compare policies of different providers. Prices vary depending on the features and benefits offered by policies. The critical illnesses covered under each policy are also different. Make sure to take into account the type of illnesses covered, sum assured, claim settlement ratio and the payment procedure while selecting the critical illness policy.