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What are the factors affecting the premium of critical illness insurance?

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A health insurance plan that acts as your safety shield at the time of medical emergencies is no longer a good-to-have; it has become a must-have. As the risk and frequency of critical illnesses are rising, a critical illness cover means a sound investment in ensuring quality healthcare and peace of mind. An individual’s physical, mental, and financial health can be adversely impacted if diagnosed with a critical illness like cancer. That’s why a critical illness insurance policy pays a lump sum amount to help the policyholder, ensuring the person has access to sufficient funds to battle the illness and recover faster with the help of high-quality treatment. Before you buy the policy, you should know the benefits of having critical health insurance and how the premium is determined. Let’s learn more about it.

Understanding Critical Illness Insurance

This is a type of insurance plan that covers critical or life-threatening diseases like stroke, cancer, kidney failure, paralysis, multiple sclerosis, heart attack, etc. If you get diagnosed with any of the covered critical illnesses listed on your policy and file a claim request, the insurer will pay a lump sum compensation up to the sum insured, no matter what the treatment costs are. For instance, you have purchased a critical illness insurance policy with a sum insured of INR 15 lakhs, and your treatment costs amount to INR 11 lakhs. Insurance will pay you the entire amount and will not ask for any bills or documents; the only document required is proof of the diagnosis.

However, you can avail of the compensation only if you survive a certain period after the date of diagnosis. This period is called the survival period and can range between 14 and 30 days based on the policy and insurer.

Is there a Waiting Period for Critical Illness Insurance?

Like standard health insurance plans, critical illness insurance also has a waiting period, but it is much less. The waiting period is usually 90 days from the date of policy purchase.

Factors Affecting the Premium of a Critical Illness Insurance Plan

Several factors affect the premium of critical health insurance, such as –

1. Age: A person’s age is an important factor affecting the premium of a critical illness insurance plan. If you buy this policy at a young age, the premium will be lower because the risk of developing a critical illness is low. As you age, the risk increases, and so does the premium.

2. Family history: If you have a family history of critical illnesses like heart disease or cancer, you are at an increased risk of developing such ailments. It may be difficult for you to get a critical illness insurance policy, and if any insurer offers coverage, the premium charged will be high.

3. Pre-existing conditions: People with pre-existing conditions will have to pay a higher premium than those who don’t have any medical issues.

4. Body Mass Index (BMI): An individual with a higher BMI is more vulnerable to ailments involving the heart and muscles. This means regular medical attention, such as doctor visits and treatments, and the probability of filing claims is high. So, considering all the health risks, the premium will be high for a person with a high BMI.

5. Lifestyle: Poor lifestyle habits, such as a diet lacking in essential nutrients, lack of exercise, smoking, and consumption of alcohol, increase the risk of health issues; hence, the premium charged for a critical illness insurance plan will be high. Also, if you are an adventure freak and regularly engage in bungee jumping, skiing, scuba diving, etc., the premium will be more.

6. Work environment: The Workplace affects the premium of a critical health insurance plan. If you work in a high-risk, stressful, or hazardous environment, the premium of a critical illness insurance policy will be higher.

7. Sum insured: The higher the sum insured, the higher is the premium.

8. Number of illnesses covered: Policies which cover more critical or life-threatening illnesses have higher premiums.

9. Riders: Opting for riders or add-on covers will increase the premium. So, you must choose only those add-ons which are required.

10. Medical inflation: When inflation leads to a rise in healthcare costs, insurers will also increase the premium.

Tips to select the premium of a critical illness insurance policy

If you are looking at affordable premiums for critical illness insurance, here are some tips to help you –

• Choose an adequate sum insured that can cover your medical and non-medical expenses. A higher sum insured will lead to higher premiums, so you must choose an amount that offers sufficient coverage and is affordable.

• Assess the risk factors of developing critical illnesses and look for appropriate coverage.

• A policy covering a wide range of critical illnesses will be expensive. You must decide whether to opt for broader coverage or a basic one.

• Buying critical illness insurance at a young age will result in lower premiums.

• Check for discounts by maintaining a healthy lifestyle, utilising the no-claim bonus, or bundling with other insurance products.

• Opting for a critical illness insurance rider will be less expensive compared to a standalone policy. If you don’t have a family history of such illnesses but want to extend the scope of coverage of your standard healthcare plan, an add-on cover may provide adequate coverage.

• Comparing quotes offered by different insurers will help you find the best health insurance plan that meets your requirements.

Conclusion

From diagnosis to recovery, the treatment costs of a critical illness like cancer can run into several lakhs. Having a critical illness insurance plan with adequate coverage will ensure you don’t end up exhausting your entire savings to pay the hospital bills. At the same time, you must look at the factors that affect the premium of critical illness insurance so that it does not burden you financially.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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