• Introduction
• Two ways in which we can buy a Critical Illness Cover
• Comparison: Critical Illness Standalone Policy Vs. Critical Illness Rider
• Comparing costs between Critical Illness Riders and Standalone Policies
• Which is better for you? 

We all have preferences in life. For instance, some of us like traveling by train while others prefer taking a flight e.g. if you travel from Delhi to Mumbai by train, it could take 18 - 24 hours, but the cost of your ticket will be reasonably less. For those who have time to spare, and enjoy the experience of traveling with others, taking a train would be a preferred option. Some others might prefer a flight, even if it means shelling out more money for tickets - as it saves them time. 

In a nutshell, each option has its own merits and flaws, and we make a decision based on our preferences. Similarly, when we want to buy a Critical Illness Insurance too, the choice between a Critical Illness Rider (an add-on with a term/ health insurance plan) and a Standalone policy has to be made, after carefully understanding their respective flaws and benefits. 

A critical illness cover can protect your and your family’s finances in case you're diagnosed with a serious disease listed in the policy. The policy pays your family a lump sum amount of money, which can act as a replacement for your income. Further, this amount could help you and your family meet additional expenses like buying a wheelchair, hiring a full-time nurse, long-term medical expenses, and so on.

In this article, we will talk about these two options for buying a critical illness cover, and their respective pros and cons.

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One can buy a critical illness cover in one of the following two ways - 

1- Critical Illness Rider with a base Term or Health Insurance - 

Many Insurers give you the option of taking a Critical Illness Rider with your term life insurance or health insurance as an add-on. When you buy this add-on with your health insurance, the Critical Illness component is listed as a separate Sum Assured.

On the other hand, if you buy it with term insurance, your Rider can be one of two types based on the policy - Comprehensive Rider or Accelerated Rider. It is important for us to understand the difference between these two types, so we're not taken by surprise at the time of the claim. 

A Comprehensive Critical Illness Rider provides an additional cover amount, in addition to your term plan cover. If there is a claim, this amount will be paid to you, while keeping your base term insurance cover 100% intact. 

However, in an Accelerated Critical Illness Rider, the Rider cover is a part of the base cover you buy and is just paid to you as an advance from the base sum assured. So, if there is a claim, this amount will be paid to you & the base term insurance cover is reduced by an equal amount.

2- Standalone Critical Illness Cover -

Besides these Rider options, you also have the option of buying a Standalone Critical Illness Cover, separately. Such policies usually give you a more comprehensive cover for the long term and offer some benefits over Riders. However, standalone Critical Illness policies have their own disadvantages too, and hence, you must weigh your options thoroughly before making a decision. 

Let's help you make this comparison quickly!

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Now that we have a basic understanding of the two types of Critical Illness insurance policies, let us look into some details and understand which among the two could be a better fit for you. 

• Coverage Limitations: Critical Illness Riders, whether comprehensive or accelerated, have some limitations in terms of the cover amount and the term of the policy. As per IRDA regulations, a rider’s premium cannot be higher than the base premium of the term insurance plan. Further, there are limitations on the Sum Assured as well, which can not be more than a certain percentage of base Sum Assured or has a fixed limit. There are no such linked limitations on the amount of cover you can buy with a Standalone Critical Illness cover. Hence, you can choose to buy an adequate cover, based on your needs. 
• Illness Limits: In a Critical Illness Rider, many of the listed illnesses only cover advanced stages of an illness. For instance, Stage-1 Cancer is not covered in any of the critical illness riders we checked. So, in case you want a plan that covers all stages of the disease, you might need to look for a standalone policy. 
• Base Plan: As Critical Illness Riders are an add-on, you are first required to purchase a term or health insurance plan. A Standalone Critical Illness cover is a separate insurance policy that can be bought by itself.
• Documentation: If you buy the Critical Illness Rider, you may not need to provide any additional documents, beyond what you’ve already submitted for the base plan. However, as the Standalone Critical Illness cover isn’t linked to any policy, you will have to provide the required documentation all over again. 
• Medical Tests: Similarly, since you’re likely to go through medical tests for your base health or term insurance plan, the same tests will cover the requirements for the Critical Illness Rider as well. If you’d like to buy a Standalone Critical Illness cover, however, you will have to undergo a separate set of medical tests, as required by the insurance company. 

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Before buying any insurance cover, you must compare the premiums & understand how they will impact your finances in the long run. 

An important thing to know is that at a young age the cost of a Critical Illness Rider and a Standalone Policy might look very similar. 

But, as you grow older, the cost differential keeps getting bigger. This happens because the premium of a Critical Illness rider stays constant for several years through the policy term, whereas the premium of a Standalone Critical Illness Policy increases with age.

While there isn’t an absolute answer to how much the premium might increase, let us look at an example for this cost comparison. 

Table 1: Comparing costs of Critical Illness Covers over time

In this example - at age 30, if you buy a term insurance plan and decide to also attach a Critical Illness Rider, the cost of the rider is Rs. 6136. A friend of yours who is also 30 yrs old and buys a Standalone policy from the same company will pay Rs. 2368 to start with. 

When you both turn 50 years old, the critical illness rider that you had bought will still cost Rs.6136 whereas your friend may be shelling out Rs 12210 for the Standalone Critical Illness cover that had bought.

Hence we see that over the long term, a Critical Illness rider works out to be much cheaper than a standalone Critical Illness cover. 

Note: There are exceptions to this fact that all Rider premiums stay constant throughout the term. Some Riders have a cost-upgrade every few years, and some policies indicate that the rider premiums could be revised at a later date. You must go through policy terms and conditions in detail to get the perfect picture of what will be applicable to your plan. 

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When deciding whether you must opt for a Critical Illness Rider with your term insurance or health insurance plan or you should opt for a Standalone policy, you should make this decision based on what is more important to you. 

If convenience and price are important: You should consider choosing a Comprehensive Critical Illness Rider. This plan will provide you benefits broadly similar to a standalone cover, at a fixed premium (for several years) through the term of the policy.

If an adequate cover is important: Then, you should go for a comprehensive standalone critical illness cover. Although this cover will be expensive and may require you to provide additional documents and medical reports, it will cover a comprehensive list of illnesses (across various stages of the disease) and will have very few limitations.

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Want to learn all there is about Critical Illness Insurance, in one shot? We got you covered. Download this free resource - The Most Definitive Guide To Critical Illness, and empower yourself to make an informed decision, in just a few hours! 

If you have any specific questions related to critical illness insurance, you can post them on the Beshak Forum, and get answers from experts for free!