Life insurance vs critical illness cover vs mediclaim: What you need to know

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My annual income is 9 lakhs. I am planning to buy a term insurance policy of 50 lakhs rupees with critical illness benefit rider. I wish to know whether should I buy this rider or should I buy a health insurance policy instead of this critical illness rider. -G Trinath

Buying a critical illness is as important as buying an adequate life insurance cover. The critical illness cover provides benefits in case the insured person is diagnosed with specified critical illness which incapacitates partly or fully a person from engaging in gainful employment or business. The critical illness policies cover some of the critical illnesses like Cancer, Heart Attack, Paralysis, Kidney Failure etc.

As far as having critical illness as a rider to a term plan is concerned, I would advise you to first buy a term plan minimum 12-15 times of your annual income. In my opinion the cover of Rs. 50 lakhs which you are planning to buy is grossly inadequate. So first buy term plan for minimum of Rs. 1 Crores and then buy a standalone critical illness plan equal to the life cover.

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Please note that health insurance cover and critical illness cover are different products and serve different purpose. A life insurance cover takes care of eventuality of death of the insured whereas the health insurance reimburses the cost of hospitalisation of the insured. However, in the situation of a person getting diagnosed with any serious illness which either stops or reduces his earning ability, neither of these two insurance cover comes to his rescue. It is for this situation that one needs critical illness cover where the insurance company pays the sum assured under the critical illness on such diagnosis.

Balwant Jain is a tax and investment expert. He can be reached at [email protected]

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