A major illness could have a devastating impact on the patient and his/her family. It often translates into significant medical expenses and may leave the family struggling with daily finances. In such situations, a critical illness insurance acts as a saviour as it guarantees financial cover when the insured or the family require funds for meeting medical and related expenses. 

Under critical illness insurance, the insurance provider pays a lump sum amount to the policyholder in case a serious illness is diagnosed. The list of illnesses is specified on a predefined list under the terms and conditions of the policy. This cover helps in meeting all hospitalisation/medical expenses while allowing the patient’s family to manage daily expenses with ease. 

Let’s understand more about critical illness insurance cover and why it is important to have one.

Who needs Critical Illness Insurance?

A critical illness insurance policy is helpful for those who want to avoid taking any chances when it comes to certain health conditions, especially those who have had a history of illnesses. It can prove useful for primary breadwinners who cannot take a financial hit arising out of a critical illness. These plans are also beneficial for those who lack sufficient savings and/or lack an employee benefits package which covers prolonged sick leave. 

Critical insurance health plans are available for Indian citizens who are over 18 years and below 65 years of age. Applicants over 45 years of age may be required to go through mandatory pre-policy medical check-ups. Under such plans, family members (who are directly related, like parents, children, siblings, and spouse) can also be covered under a single plan, as per the policy terms and conditions. If more than one individual is covered under a blanket critical illness policy, each family member can qualify for a cover once during the entire policy tenure.

Additional Reading: Why insurance against cancer is critical

Benefits of Critical Illness Insurance Cover

Here are some of the primary benefits of critical illness insurance cover:

  • It provides immediate financial support: Critical ailments affect an individual physically and also the finances of the individual and family. A critical insurance cover pays a lump sum amount that can be used for meeting any medical expenses and also household expenses.
  • It comes with tax benefits: Critical illness insurance pay-out is completely tax-free as per Section 80D of the Income Tax Act. Thus, investors can also enjoy tax benefits from this.
  • Fewer Worries: The policy provides peace of mind and allows one to focus on getting medical treatment instead of worrying about the arrangement of funds for medical and household expenses.
  • Cover for treatment in a foreign country: As part of a critical illness insurance plan, a fixed sum is released as pay-out after the diagnosis of a critical illness. This is irrespective of the treatment taking place in India or another country. This means that the policy helps the insured to get further medical treatment even in a foreign nation.

How do critical illness insurance policies work?

The working of a critical illness policy is simple. Which is, if you are diagnosed with one of the covered illnesses, the insurer pays the total sum insured as a single amount. Other than paying hospitalization fees, the amount can also be used for paying loan EMI, other household expenses, school fees of children, etc.

For those individuals who wish to travel abroad for further medical treatment, they can do so by using the amount received from the insurer. In all, this amount is as an income replacement and can be used in the way that an individual feels fit for his/her financial needs.

What is the right insurance amount?

One of the few things that are more frightening as compared to battling critical illnesses is not having adequate funds at the right time. There is no fixed rule to use while deciding on the total sum insured one should opt for. However, one should select the cover size as per age, income, and other lifestyle needs.

Since critical illness cover comes as a one-time benefit which is paid out to the insured after the first diagnosis and upon completion of a survival period of 1 month, it is ideal to buy a minimum cover of Rs. 10 lakhs. If you are beyond 35 years of age, this is an ideal choice. People who are in the higher age group and also the income bracket can choose a higher cover.

Cover Amount in Critical Illness Insurance

The cover amount in any critical illness insurance should be decided as per age, medical history, current health, treatments expenses expected, recurring costs and existing or future liabilities in case of income loss, high risk or low-risk jobs, etc. While the coverage could vary between policies, some may cover accidental death and partial/total disability due to accidents, while others may not have such provisions. The cover must be on the higher side for the elderly since they are comparatively vulnerable to critical illnesses.

Illnesses that are Commonly Included in Critical Illness Insurance

  • Cancer
  • Kidney failure
  • Heart attack
  • Paralysis
  • Stroke 
  • Deafness
  • Visual deficiency
  • Alzheimer's 
  • Renal flop
  • Terminal/paralysis of appendages
  • Numerous sclerosis
  • Major organ transplant
  • Coma
  • Cystic Fibrosis
  • Parkinson's ailment etc

What’s not covered in critical illness insurance?

A list of illnesses that are generally not covered under critical illness insurance are:

  • Illness due to tobacco, alcohol, smoking or drug intake
  • HIV or AIDS infection
  • A patient diagnosed with a critical illness within 90 days policy start date
  • Cosmetic surgery 
  • Dental care
  • Infertility treatment
  • Civil war, terrorism, navy or military operations
  • Death within 30 days of diagnosis of critical illness or surgery
  • Hormone replacement treatment
  • Infertility treatment


In today’s day and age, an individual’s lifestyle could result in many threatening ailments. Thus, if you feel vulnerable to such illnesses, it makes sense to buy the best critical illness insurance plan and protect yourself against expenses related to such ailments.

For buying a critical illness cover, you don’t have to avoid an individual health insurance policy. It is ideal to first buy an individual health insurance policy and later, include the critical illness cover as a top-up or layer of protection combined in an existing insurance portfolio.