Should I go for critical illness rider along with term insurance?

Oct 30, 2019

We just realized that we do not have enough insurance cover for my husband.

  • DOB 24.11.1972
  • pay 22 lacs pa
  • no known illness
  • dependents wife- not working, 2 boys 16 and 12 years.
  • planning to take term insurance.

Is it advisable to add critical illness rider? what I understand is the riders are only in force during the policy paying term

1 Answer
Nov 1, 2019

Before I answer your question, let us discuss what a 'critical illness rider' offers:

"Critical illness riders payout a lump sum if the insured person is diagnosed with a critical illness, listed in the policy document, of a specific severity."

Thus the critical illness rider can be thought of as an "income replacement", assuming that the person won't be able to continue with their day jobs if they are diagnosed with a critical illness.

While this sounds good in principle, it is very important to read the fine print.

What is "specific severity"?

The words "specific severity" are important here and its definition will differ from insurer to insurer. For example, one of the critical illnesses is kidney failure. A particular insurance company (I won't name it since they keep changing their policy terms) says this:

"End stage renal disease: chronic or irreversible failure of both kidneys to function, as a result of which regular dialysis is required or renal transplantation is carried out".

So if one of your kidney fails then you will not be paid out the lump sum under the critical illness rider. For other diseases the definition of "specific severity" may be such that the chances of survival of the person would be very less if he/she suffers from a critical illness of that "specific severity".

In case of death, the term insurance payout would be paid in any case, so the additional critical illness rider may not be of much help. I would leave it upto you to decide whether you would want to opt for such a rider. 

Increase your health insurance cover instead

Another argument in favour of critical illness riders is that the health insurance cover may not be sufficient for the treatment of the critical illness. I completely disagree with this. You can get a large insurance cover (Rs 15 lakhs, Rs 20 lakhs etc) by opting for a top up insurance policies. The premium for top up insurance policies is quite low. For example have a top up insurance policy for me and my wife, with a cover of Rs 15 lakhs and annual premium of Rs 3,000 (three thousand).

What is a top up health insurance? How does it work?

Family history of diseases

However if your family has a history of diseases like heart problems, diabetes, cancer, Parkinson's disease etc. then it may make sense to opt for a critical illness rider which covers those illnesses. In any case you should always try to increase your health insurance cover first.

My personal opinion is that the critical illness riders are designed to earn a higher revenue, without being of much help.

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Sachin Shah is a 30 year old Senior Software Engineer, working at an IT services company in Bengaluru. He and his wife want to plan for their retirement and also want to save for their child's education, wedding and for buying a car.

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