A healthcare emergency can occur at any time, causing both financial and emotional burdens. It makes health insurance purchase a necessity for every individual, given the spurt of various health issues and increasing medical costs. Most individuals think a basic health cover provides 360-degree coverage against all sorts of medical treatment costs, which is partially true. Alongside, the availability of critical illness policy adds more load to the confusion.
That is why many people ask about the difference between health insurance and critical illness insurance. If you plan to secure your health, you must understand these differences thoroughly before buying a plan.
Let’s begin with the basics of health and critical illness insurance.
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What is Health Insurance?
Health insurance plans are usually indemnity plans that provide monetary aid during a health emergency. They cover the actual hospitalisation expenses, including doctor’s consultation fee, room rent, medications, and others. Under a health insurance plan, the reimbursement of bills or direct settlement with the hospital happens as per the limits defined in the plan. It may not cover various diseases and have a long waiting period.
A health insurance policy is also valid for a limited timeframe, generally one year. After the completion of this period, the policy contract needs to be renewed. Types of health insurance plans include individual health plans, family floater plans, and group health plans.
What is Critical Illness Insurance?
A critical illness policy, as the name suggests, provides insurance cover against life-threatening illnesses. Once the insured is diagnosed with the covered critical illness, a lumpsum amount is paid, which can be used for the treatment and income replacement. Unlike a health insurance policy, you need not necessarily be hospitalised to file a claim under critical illness insurance.
In simple words, a critical illness policy can help you avoid facing a significant financial strain to get good quality, expensive treatment for a severe illness. The specific list of illnesses covered in the policy is clearly defined in its inclusion terms.
You should also know that you can get critical illness insurance coverage under a term plan with the help of additional riders. Make sure you know about term insurance benefits in general before you choose this option.
|Health Insurance Plan
|Critical Illness Policy
|Insurance Coverage for
|Hospitalisation resulting from situations like accidents and bodily diseases – new or pre-existing
|A specific set of critical illnesses
|Cashless medical treatment, flexibility to choose the sum insured, additional cover for family etc
|Lumpsum amount payable when the insured is diagnosed with any of the specified critical illnesses
|Typically ranges from Rs. 5-10 Lakhs
|Ranges from Rs. 5-50 Lakhs
|Around 1 month in general; 1 to 4 years for pre-existing diseases.
|Until the date of expiry or when the chosen sum insured gets exhausted
|Until the date of expiry or when a claim(s) is made/settled
|Varies as per the chosen sum insured and insurer
|Varies as per the chosen sum insured, diseases covered, and insurer
Why Should You Buy a Term Plan with Critical Illness Cover? (focus on CIDR)
Rising inflation has led to an increase in the cost of critical illness treatment. In most cases, a basic health insurance policy may not prove sufficient to cover the expenses of regular health check-ups, screening, and hospitalisation. It is where a critical illness policy proves to be financially helpful.
Although you can choose critical illness coverage with a health plan, a better alternative is to buy a term plan with critical illness protection. Such a critical illness policy provides comprehensive coverage to deal with various severe health issues along with financial protection to the insured’s family. You can add the benefits of critical illness insurance to a term plan in the form of additional riders.
To understand how such a critical illness policy works, let us take the example of Max Life Critical Illness and Disability Rider –
Mr. Seth purchases Max Life Online Term Plan Plus with a 30-year policy term and a sum assured of Rs. 50 Lakhs. He adds Max Life Critical Illness and Disability Rider at a nominal price with a rider sum assured of Rs. 10 Lakhs for additional protection.
Unfortunately, he gets diagnosed with one of the listed illnesses in the fourth year of the critical illness policy. He receives Rs. 10 Lakhs on confirmed diagnosis of the illness, which he can use for the treatment or other related expenses. Not only this, but also he receives a Wellness benefit under the rider in the form of a discount on annualised premium as per the healthy weeks he accumulates in a year.
Because of uncontrolled health issues, he then dies while the rider and base policy are in force. In this case, the policy nominee receives the death benefits (Rs. 50 Lakhs) as defined in the base policy after the claim is approved.
While health insurance plans help cover expenses related to hospitalization, a critical illness insurance policy helps deal with various financial facets of a severe illness. Both these types of insurance policies are designed to fulfil a particular purpose. Hence, it is crucial that you make a choice based on your needs and a complete understanding of the policy benefits.