Critical illness or Mediclaim?

ADITI just spent her Diwali bonus on buying herself a whole new look --new shirts, sunglasses, jeans, shoes the works.

Source: Moneycontrol.com

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ADITI just spent her Diwali bonus on buying herself a whole new look --new shirts, sunglasses, jeans, shoes the works. When her friend Reema came over to check her out, she exclaimed "Oh haven't you bought any Capri pants? They are absolutely critical these days."

Just when you've thought you had it all, people have a way of bringing you back on earth by reminding you of something you don't have and making you horribly inadequate. For instance you've been a good boy and started retirement planning, bought adequate life insurance cover and taken Mediclaim, when someone tells you 'Oh my God! You don't have CI? It's absolutely critical these days."

And again you're left feeling inadequate. But for once they may be right. CI is actually critical. It's the Critical Illness cover. And if you're wondering how is that different from Mediclaim then let us tell you.

We spoke to V Rajagopalan, Chief Actuary of ICICI Prudential Life Insurance "Both Mediclaim and CI rider have their right places. While Mediclaim will cover expenses related to treatment and hospitalization, the CI rider will take care of other circumstances not covered under Mediclaim. Mediclaim is generally more comprehensive in the sense that it covers more medical conditions than the CI rider.

However, this cover is restricted to expenses incurred in hospitalization or for treatment. There are other expenses like traveling expenses of the spouse or in case of serious conditions, even loss of pay. While these are not covered under Mediclaim, the CI rider would prove helpful".

Feature	Critical Illness	Mediclaim
Need and requirement	A lump sum meant to compensate loss of pay for a specific time frame, which can be used towards generating regular income or towards repayment of debts when you are out of action and incapable of going to work.	Mediclaim will pay for your costs of treatment. It will take care of your pre hospitalization, actual hospitalization and post hospitalization needs.
Illnesses covered	Certain defined illnesses	It is more comprehensive and cover almost all medical conditions
Mode of insurance	It is an outright payment that compensates you on the basis of a diagnosis report. You need not submit any bills to claim the amount.	Mediclaim is a re-imbursement, which compensates you for the exact amount of medical expenditure on production of relevant bills.
When is insurance paid	On submission of diagnosis report	On submission of bills or if cashless, on relevant authorization
Nature of insurance	It is taken for a long period of time, usually 10-20 years	It is an annual contract where the policy must be renewed every year
Tax sops	You get a rebate under section 88 on your critical illness premium paid	You get a tax deduction under section 80D of your Mediclaim payment

When does one buy the CI rider and when should one opt for Mediclaim? Rajagopalan advises, "Since Mediclaim is an annual contract, premiums would change every year. But the CI rider is a long-term contract and the premium fixed at the time of taking the policy would remain the same throughout the life of the policy. So it would make sense to buy the CI rider at a young age for a long term."

So go out and buy that CI cover and those critical Capris too. But don't let anyone tell you that you need anything more than this. Unless of course Capri's go out of style this season and you have to now buy kimono's!

Photograph: Sean Gallup/Getty Images

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