Sorting out health insurance can feel overwhelming, especially when different policies are available for unique needs. Two common options—health insurance and critical illness coverage—are often misunderstood. General health insurance covers hospitalization and treatment expenses but may not protect against severe illnesses like cancer or heart disease. Critical illness insurance fills this gap by providing a lump sum payout upon diagnosis of a covered critical condition, helping policyholders manage the financial burden of such life-altering illnesses.
While both are types of health insurance, they differ significantly in coverage and benefits. Choosing the right one means being better prepared for unforeseen medical emergencies. That is where it has become important to know the difference between them. Let’s learn how health insurance differs from critical illness coverage.
What is Health Insurance Cover?
Health insurance provides financial protection against medical expenses. It covers most of the medical bills from seeing the doctor to hospital stays, surgeries, or even medications. However, health insurance doesn’t provide any cash, instead, it’s a contract where the insurance company covers medical expenses when you’re sick or injured. Your insurer may either pay the healthcare provider directly or reimburse you for expenses incurred. They won’t pay for those medical issues when you see fit. Instead, they only pay for those medical expenses that are mentioned in the health insurance policy based on terms and conditions.
Certain plans limit coverage to in-network providers, while others provide additional coverage for out-of-network services. There is a wide range of health insurance coverage such as individual health insurance plans, family, health insurance plans, Group health insurance plans, and more. Most health insurance policies do not have a lifetime or annual coverage limit. They’ll keep paying your medical bills as long as the policy covers them.
Note: Health insurance plans usually last a year, then you need to renew them. (Renewal depends upon your employment status)
Example
- Dr. James Rodriguez is a family-oriented professional living with his wife, son, and his in-laws.
- Understanding the importance of healthcare protection, James has structured a comprehensive health insurance portfolio including:
- Family-floater plan
- Personal health plan as the family’s main income provider
- Critical Illness Covers for his in-laws.
- Their base Family-Floater plan also covers preventive care benefits.
- This insurance combination ensures James and his loved ones are financially secure against medical emergencies.
What is Critical Illness Cover?
Critical Illness Coverage (or major medical coverage) isn’t like regular health insurance but it provides financial assistance for major illnesses. That doesn’t mean it outpaces the need for general health insurance, instead, when you sign up for critical illness coverage, your insurer will mention which health issues are covered by the policy. These may include heart attacks, organ transplants, cancer, renal failure, and other life-threatening conditions.
Unlike health insurance, critical illness coverage doesn’t directly pay your medical expenses, instead, you need to choose a specific coverage amount like $65,000. If you’re diagnosed with a covered condition, the insurer will issue the agreed amount to you. You can spend this payment freely or pay out-of-pocket medical expenses, unexpected recovery costs, or everyday living expenses.
Note: Critical Illness Insurance usually lasts for longer periods like 20 years or until you reach 75 years, or for your entire life. Your coverage and costs will stay the same as long as you keep up with your premiums.
Example
- Mrs Chen has been diagnosed with kidney failure.
- She had to undergo treatments like dialysis, kidney transplants, and medication that cost around ₹16 lakhs.
- Mrs Chen had previously signed up for a critical Illness Cover for herself. It had a set amount of ₹15 lakhs.
- This means that most of her kidney treatment is covered under the Critical Illness health insurance cover.
- She only had to pay ₹ 1,00,000 from her pocket. (Note: If she’d chosen a plan with a bigger coverage amount, the insurance would have paid for everything.)
What’s the Difference Between Health Insurance and Critical Illness Cover?
Both of these health insurance policies aim to provide financial coverage to the policyholder as per their medical need. While health insurance reimburses costs based on hospitalization, critical illness cover provides a fixed benefit for specific diagnoses. Let’s check out the table below to understand what are the key differences between them, helping you choose the right policy based on your healthcare and financial needs.
| Parameter | Health Insurance Plan | Critical Illness Cover |
| Type of plan | Indemnity plan: covers actual expenses up to the sum insured. Can be reused until the annual coverage is exhausted. | Fixed benefit plan: Pays the entire sum assured on diagnosis of a covered illness. |
| Coverage | Covers a variety of situations like accidents, diseases, pre-existing conditions, maternity costs, AYUSH treatments, ambulance charges, and more. | Covers specific critical illnesses like cancer, heart ailments, organ transplants, paralysis, and more. The number of illnesses depends on the insurer. |
| Policy Duration | Valid for one year and needs renewal annually unless specified otherwise by the insurer. | Valid until a claim is made or until the policy expires. |
| Waiting Period | Pre-existing conditions and maternity benefits have a waiting period of 1-3 years. | Waiting period for claims is usually 90 days from a policy start date. |
| Survival Period | Not applicable | The policyholder must survive 14-30 days post-diagnosis to claim benefits. |
| Reimbursement/Claim Payment | Covers hospitalization (24 + hours), daycare treatments, and other expenses. Reimbursement is done after treatment. | Provides a lump sum payout on diagnosis of a specified critical illness. |
| Premium Costs | Higher premiums due to comprehensive coverage for various medical conditions, hospitalization, surgery, and tests. | Relatively lower premiums as coverage is limited to specific critical illnesses. |
| Sum Insured | Typically ranges from ₹5 to ₹10 lakhs. | Typically ranges from ₹5 to ₹50 lakhs. |
| Members Covered | Offers individual, family, group, and senior citizen plans. | Available only for individuals. Usually not available for senior citizens. |
Which Insurance is Better: Health Insurance or Critical Illness Cover?
Whether you need health insurance or critical illness coverage depends upon your medical condition. Since health issues are unforeseen, everyone should consider having comprehensive health insurance coverage. This will provide you with complete financial security in case of a medical emergency. Therefore, it’s a good idea for the family’s breadwinner to have an Individual Health Insurance plan, a Critical Illness cover (for serious illness), and a Family Floater health insurance plan (for the family). Or, the sole breadwinner can buy both general health insurance and critical illness coverage to ensure their family’s financial security in the future.
Nowadays, it is quite easy to compare these plans online and buy one that suits your needs and budget. There are many health insurance providers that provide quick services and options to compare different plans. But don’t forget to choose the most reliable health insurance company and check every key detail before purchasing it.
Wrapping Up
Investing in a good health insurance plan is a smart way to safeguard your future. Remember, health insurance and critical illness coverage are different kinds of medical insurance serving distinct purposes. While health insurance covers an extensive list of medical expenses related to illness, critical illness cover provides financial support specifically for life-threatening medical conditions. Therefore, getting insights about health insurance and critical illness coverage and their key differences will help you to make a wise decision while choosing between them.
Choose a reliable insurance company and carefully review policy details to ensure appropriate coverage. You can contact Even, an all-in-one health insurance solution that offers you a wide range of insurance plans, so you can choose the most affordable one as per your needs.
Frequently Asked Questions (FAQs)
What’s the basic difference between health insurance and critical illness coverage?
Health insurance pays for your regular medical bills and hospital stays. On the other hand, critical illness cover gives you a single lump sum payment if you’re diagnosed with a serious illness like cancer.
How do claim payments work for each health insurance type?
Health insurance pays the hospital directly or reimburses your medical costs. On the contrary, critical illness cover gives you one fixed payment that you can spend however you need.
How long does each health insurance last?
Health insurance plans usually need to be renewed annually, while critical illness coverage can last for longer periods. Yes, you can take the benefit of critical illness coverage as long as you keep paying premiums whether it’s 20 years or more.
Do I need both types of insurance?
Yes, it’s best to have both general health insurance and critical illness coverage. Health insurance covers regular medical costs, while critical illness coverage helps with major diseases and extra expenses.
What is the waiting time before I can claim?
Health insurance has a 1-3 year wait for existing conditions. However, critical illness cover has a 90-day wait from when you start the policy.
Can I save taxes on a Critical Illness policy?
Usually, yes. Critical illness policies often qualify for tax benefits under Section 80D. But it’s best to double-check with your insurance company.