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Sowmya Sundar

A PLAIN insurance policy protects your family in case of an untimely death. But what if you are afflicted by a major ailment, say, cancer. Are you prepared to meet the medical expenses? How will you run the family with the additional burden of the treatment?

Most life insurance companies are now covering this risk through a critical illness rider. The rider can be opted by paying an additional premium in addition to your basic premium. Birla SunLife's `Medicare' is a term plan with an optional critical illness rider and waiver of premium rider. There are two options with regard to the base policy — that is, with and without survival benefits. The benefits offered by Birla SunLife are similar to those by similar policies in the market.

The critical illness rider covers four illnesses — cancer, stroke, heart attack and surgery to coronary artery. On being affected by any of these diseases, the sum assured under the rider as opted by you will be paid immediately on diagnosis. This amount can be used for the treatment or any other purpose. It is not necessary to provide bills, as it is not a reimbursement of expenses.

If you choose the waiver of premium option, all future premiums will be waived on contraction of the critical illness or on permanent total disability. The base policy continues to be in force.

The plan offers two options:

Option I is a plain term cover. On death, the sum assured under the policy is paid. But on survival, no benefits are paid.

Option II is a term cover with return of premiums. That is, on death, you will get the sum assured and all the premiums paid, barring the rider and extra premiums, will be refunded. This means that the premium paid on the base policy will be refunded, but not that on the critical illness rider or waiver of premium rider.

Obviously, the premium payable for option II is higher than that for option I. The additional premium paid under this option is essentially idle money that does not earn any returns. If invested elsewhere, this could fetch you a return. Option two also has a surrender value, which depends on the number of years premiums have been paid and the duration of the policy. The surrender value can range from 5 per cent to 70 per cent of the premium paid, excluding any rider or extra premiums.

The main disadvantage of opting for a critical illness cover is the limited coverage that can be taken. Rider premiums cannot exceed 30 per cent of the base premium and critical illness covers are expensive.

However, your critical illness cover eligibility would increase in the case of option II, as the premiums would be higher.

(Readers are requested to compare products featured under this column with similar ones offered by other players.)

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