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Life insurance policies with critical illness riders sell the idea of complete payment in case an illness is detected. These companies say as the entire payment is made at a go, this helps one recoup expenses in case of a serious illness, even if it results in job loss.
However, claiming the amount isn’t easy.
So, before buying a policy, read the exclusions. Policyholders could be ignorant or information could be hidden from them. Sometimes, insurance companies and their agents don’t explain or clarify certain clauses to buyers.
The solution: Buyers need to read the fine print carefully. If this is not done, a policy holder is bound to face claim rejection, especially in the case of policies covering special health issues such as critical illnesses plan and disability benefits. Especially for covers/ riders/ top- ups given by life insurance companies, which are bought on a term plan and are indemnity plans that pay a lump sum on disease diagnosis. In comparison, covers by health insurance companies are benefit or reimbursement plans that pay the amount you spend on hospitalisation.
While policy holders are to be blamed for not reading the documents they sign on, there is a problem of no standardisation of the definitions of illnesses. Though many insurers are now defining diseases, others still use terms such as stroke and paralysis very loosely. For instance, only two fingers could be paralysed but that is not the definition for insurers. A few examples of misleading coverage in policies: Survival period clause: Most critical illness policies or riders pay the claim for any listed critical illness if the policyholder survives for at least 30 days after diagnosis of the illness. Typically, critical illness rider or policies cover at least eight and up to 20 diseases — heart attack, coronary artery bypass surgery, stroke, cancer, kidney failure, major organ transplant, paralysis, etc.
An individual covered under a group critical illness policy pays benefits for treatment of certain diseases only if the insured survives for 30 days after the illness. This condition is never communicated to the insured.
Renal failure: While a policy holder might think the failure of a kidney amounts to renal failure, this isn’t true in insurance parlance. For renal failure, a claim will only be accepted if both kidneys of a policyholder stop functioning. “ That is because an individual can live and function on one kidney, too. Therefore, it is not a critical situation,” says an insurance broker.
The policy document of SBI Life Insurance says End stage renal disease presenting as chronic irreversible failure of both kidneys to function, as a result of which either regular renal dialysis (hemodialysis or peritonealdialysis) is instituted or renal transplantation is carried out. This is the definition given by the insurance regulator in Guidelines of Standardisation in Health Insurance.
According to the claims data by ICICI Lombard General Insurance, the past three years have seen a notable rise in kidney ailments. In 2013, insurance claims for kidney ailments rose 46 per cent compared to 2012. In 2012, the growth was 12 per cent vis- à- vis 2011.
Deafness and blindness: In case an eye or an ear stops functioning, it might not be enough to secure a claim under a critical illness rider. The policies state complete blindness or deafness are required for such claims.
Aviva Life Insurance’s critical illness rider brochure defines blindness as “total, permanent and irrecoverable loss of sight in both eyes, as a result of illness or accident”.
Deafness is defined as total and irreversible loss of hearing in both ears. The diagnosis must be supported by audiometric and sound threshold tests, provided and certified by an ear- nose- throat (ENT) specialist.
Total deafness is defined as the loss of at least 80 decibels in all frequencies in both ears. Permanent disability: ICICI Prudential Life Insurance’s accidental death and disability benefit rider’s brochure says, If you have an accident that results in total and permanent disability, 10 per cent of the rider sum assured will be paid each year from the end of the first year after the disability date, for the remainder of the base policy term or 10 years, whichever is less. While one of the conditions for the payment of accidental death or disability benefit is the death or disability due to accident must be caused by violent, external and visible means. The benefit won’t be paid if one loses a hand or a leg. Going by the condition of violent, external and visible means, even sprains should be allowed to be claimed for under this policy, but insurers mostly refuse. But we have helped people get claims for sprains under such policies.
ICICI Prudential Life’s brochure says for accidental death and disability benefits, a person will only be regarded as ‘totally and permanently disabled’ if he/ she, due to accident or injury, suffers a loss such as: a) Loss by physical separation of two limbs or the complete and irremediable loss of sight in both eyes or loss by physical separation of a limb, accompanied by the complete and irremediable loss of sight in an eye (where limb means an entire hand or foot) or b) has been continuously disabled for a period of six consecutive months and incapacitated to such an extent as to render the person unlikely to resume work or attend any gainful employment or occupation.
Pre Existing diseases (PEDs): Most health insurers and policies cover PEDs after a waiting period of two to four years. However, there is no guarantee any other disease linked ( even remotely) to a PED will be covered during the waiting period.
For instance, one has a PED of blood pressure, the waiting period is four years and the policy holder is diagnosed with some kidney- related problem during the waiting period. While kidney ailments could arise due to blood pressure, this isn’t always the case. In this case, insurers might refuse claims for kidney- related problems because these could be linked to blood pressure and the waiting period isn’t over.
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