More flexible but less comprehensive

If you are looking for protection, the first insurance cover to buy is a term life insurance plan to take care of your family’s financial needs in your absence. Another important cover to have is a critical illness (CI) cover, which can pay for treatment and provide an alternate source of income if you lose your job due to illness. You can buy a term plan and a critical illness plan separately. You can also buy a term plan which has the critical illness rider. But what if you have the option to convert your term plan into a critical illness cover if required? 

IDBI Federal Life Insurance’s iSurance Flexi Term Insurance Plan offers just that. In case the death benefit is less than or equal to Rs 1 crore, for specified medical conditions the payout as a percentage of death benefit is as follows: 71 per cent in case of cancer, 50 per cent in case of heart attack, and 50 per cent in case of stroke. After the payout the policy will terminate and no further benefit will be payable on death. In case the death benefit is more than Rs 1 crore and you exercise the conversion option, you get the CI payout up to Rs 1 crore, and the remaining sum assured will continue as reduced death benefit, if the policy is in force. For this customers will have to pay the reduced premiums corresponding to the reduced death benefit till the end of the premium payment term. 

For a 35-year old non-smoker male, the cost of a Rs 50 lakh cover for a 25-year term with the option to convert the cover in case of a terminal illness is Rs 5,135 per annum. In case of death, the benefit paid would be Rs 50 lakh. In case the customer opts for the conversion option if he is suffering from a terminal condition, his payout will be as follows: Rs 35.5 lakh for cancer and Rs 25 lakh for heart attack and stroke. 

On the usefulness of a flexi term plan, Deepak Yohannan, chief executive officer, MyInsuranceClub says: “Suppose you have an extremely high term cover but are diagnosed with a critical illness like cancer, due to which you lose your ability to earn a living. You will incur a big expense on your treatment, which cannot be paid by the term plan. And if you outlive the illness, you may lose the ability to service the term plan. The lump sum payout makes this plan attractive.’’

One weakness of the plan, however, is that only three diseases are covered. “Standalone CI plans cover as many as 34 diseases and at varying levels of severity. But their premiums are higher,” says Santosh Agarwal, head of life insurance, Policybazaar.com. Says Karthik Raman, chief marketing officer and head-products and strategy, IDBI Federal Life Insurance: “While stand alone CI covers are available, pricing is an issue. In case of iSurance the customer gets the benefit of two plans in one. Our plan is also priced competitively.’’ 

For instance, the premium for a 30-year old non-smoker male, for a Rs 1 crore death benefit with critical illness conversion option is Rs 7,840. In case of other life insurance companies the premium ranges from Rs 9,353 to Rs 14,709. This includes a CI rider of Rs 10 lakh for which the premium ranges from Rs 2,857-4,186, according to data provided by Policybazaar.com. In case of iSurance the death benefit ceases after the critical illness payout if the sum assured is Rs 1 crore. In case of the other plans the death benefit continues. iSurance also offers other variations like fixed and monthly increasing payout of the death benefit, which are increasingly becoming popular with customers, says Raman.

Pros and cons of dual-benefit plan

Policyholder can opt for part payout of death benefit in case of critical illness

If sum assured is Rs 1 crore or less, term plan ceases after payout. If sum assured is higher, term plan with reduced death benefit will continue

On the flip side, it offers coverage only for three diseases

Standalone critical illness riders can offer coverage for up to 34 diseases