Page 164 - IC38 GENERAL INSURANCE

With advancement in medical science, people are surviving some of the
major diseases like cancer, strokes and heart attack etc. which in earlier
times would have resulted in death. Again, life expectancy has increased
considerably after surviving such major illnesses. However surviving a major
illness entails huge expense for treatment as well as for living expenses post
treatment. Thus onset of critical illness threatens financial security of a
person

a) Critical illness policy is a benefit policy with a provision to pay a lump
sum amount on diagnosis of certain named critical illness.

b) It is sold:
 As a standalone policy or
 As an add-on cover to a few health policies or
 As an add-on cover in some life insurance policies

In India, critical illness benefits are most commonly sold by life insurers as
riders to life policies and two forms of cover are offered by them – accelerated
CI benefit plan and standalone CI benefit plan. Precise definition of the covered
illnesses and good underwriting are extremely important when this benefit is
sold. To avoid confusion, the definitions of 20 most common critical illnesses
have been standardized under IRDA Health Insurance Standardization guidelines.
(Please refer to the Annexure at the end).

However, the chance for adverse selection (whereby mostly those people most
likely to be affected take this insurance) at issuance stage is quite high and it is
important to determine health status of the proposers. Due to lack of sufficient
data, currently pricing of critical illness plans is being supported through
reinsurers‟ data.

c) Critical illnesses are major illnesses that could not only lead to very high
hospitalization costs, but could also cause disability, loss of limbs, loss of
earning etc. and may require prolonged care post hospitalization.

d) A critical illness policy is often recommended to be taken in addition to
a hospital indemnity policy, so that the compensation under the policy
could help in overcoming the financial burden of a family whose member
is affected by such illness.

e) The critical illnesses covered vary across insurers and products, but the
common ones include:
 Cancers of specified severity
 Acute myocardial infarction
 Coronary artery surgery
 Heart valve replacement
 Coma of specified severity
 Renal failure
 Stroke resulting in permanent symptoms
 Major organ / bone marrow transplant
 Multiple sclerosis

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