Critical Illness cover or SIP for the same cover

The common question that many have is that should be really buy an insurance coverage, esp on health and rather invest the premium amount in an SIP over say 10 years.

This is a comparing apples to oranges. Let us assume that you need Rs 20L to cover for any critical illness. A critical illness rider can be purchased as an independent policy or as an optional rider on a health or a life insurance. Purpose of the rider is that if you are found with any critical illness as per your policy terms and survive for a particular time post the detection of the illness , which is usually 30 days, then the insurance company pays the sum assured under the CI (critical illness). Assume the premium is around Rs 5000/- for a 30 male.

For an SIP investment to accumulate to 20L in say 10 years – 10 years being a time which you think that you may not contract any critical illness based on family history. at 8% expected returns, you will need about Rs 10,000 per month to reach that target.

It all looks nice – that what if you do not get any critical illness, then you actually have the amount to spend on anything else, or add to the retirement kitty. But what if after 7 years, you are found with a critical illness, then you may not have sufficient funds to cover the hospital bills, and manage household expenses. Remember in critical illness, the sum assured is paid in one shot to the insured, this is unlike a mediclaim where your bills are claimed against the actuals.

It is always advisable to have a medical coverage, and preferred to have a super top-up plan and with a critical illness cover.

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