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My annual income is 9 lakhs. I intend to purchase a 50 lakh rupee term insurance policy with critical illness rider. I want to know if I should purchase this rider or if I should purchase a health insurance policy instead of this critical illness rider. -G Trinathe

Buying critical illness is as important as buying adequate life insurance coverage. Critical Illness Coverage provides benefits in the event that the insured person is diagnosed with a specified critical illness which partially or totally prevents a person from pursuing gainful employment or business. Critical illness insurance policies cover some of the serious illnesses such as cancer, heart attacks, paralysis, kidney failure, etc.

Regarding having critical illness as a rider to a term plan, I would advise you to first buy a term plan at least 12 to 15 times your annual income. In my opinion, the coverage of Rs. 50 lakhs that you are considering purchasing is woefully insufficient. So first buy a term plan for a minimum of Rs. 1 crore, then take out a standalone critical illness insurance plan equal to the life coverage.

Please note that Health Insurance Coverage and Critical Illness Coverage are different products and serve different purposes. Life insurance coverage covers the eventuality of the insured’s death, while health insurance reimburses the insured’s hospital costs. However, in the situation of a person diagnosed with a serious illness that stops or reduces their earning capacity, neither of these two insurance coverages comes to the rescue. It is for this situation that one needs critical illness coverage where the insurance company pays the sum insured under the critical illness upon such diagnosis.

Balwant Jain is a tax and investment expert. He can be contacted at [email protected]

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