Sorting out medical cover gets easier when we separate two tools that do very different jobs. Health insurance pays eligible treatment and hospital bills up to your sum insured for the policy year. Critical illness (CI) cover pays a one-time lump sum when a listed serious illness (as defined in the policy) is diagnosed. In India, they often work best together; the first handles bills, the second cushions income loss and non-medical costs.
What is Health Insurance?
Health insurance is an indemnity policy. It pays actual medical expenses for covered treatments up to your sum insured for that policy year. Typical inclusions: in-patient hospitalisation, day-care procedures, pre- and post-hospitalisation, ICU, ambulance, and sometimes OPD (if the product includes it). Indian regulations recognise indemnity (pay actuals) and benefit/fixed-benefit (pay a fixed amount) as the two broad types of health policies.
How Claims Usually Work
- Cashless at network hospitals: the insurer (or TPA) settles bills directly with the hospital after approvals. You focus on care, not payments.
- Reimbursement: if you use a non-network facility or pay first for any reason, you submit documents, and the insurer reimburses eligible expenses up to your sum insured. (Exact steps vary by insurer.)
Waiting Periods and Limits to Watch
- Most policies have an initial 30-day waiting period (accidents usually exempt).
- Disease-specific waiting periods (often 1-2 years) and pre-existing disease (PED) waiting periods (often 2-4 years) are common.
- Maternity waiting periods often range from 9 to 36 months.
- Family cover is available as a family floater, one shared sum insured for named members under a single policy.
What is Critical Illness (CI) Cover?
Critical illness cover is a fixed-benefit policy. If a listed serious illness is diagnosed—say a defined stage of cancer, heart attack, stroke, kidney failure, or a major organ transplant—the insurer pays a lump sum to you. This payout isn’t tied to hospital bills. You can use it for anything: treatment gaps, income replacement, EMIs, home help, travel, or rehab. In India’s health policy framework, CI is a classic benefit-based product.
IRDAI
Two timing rules appear in most CI products:
- An initial waiting period (commonly about 90 days) from policy start.
- A survival period (often 14-30 days) after diagnosis; the insured must survive this period for the lump sum to be payable, subject to wording.
Why CI matters: health insurance pays bills, but long recoveries can reduce income for months. CI gives liquidity exactly when families need it most.
Difference Between Health Insurance & Critical Illness Cover
| Parameter | Health Insurance (Indemnity) | Critical Illness (Fixed-Benefit) |
| What it pays for | Actual medical bills (hospitalisation, day-care, eligible extras) up to your sum insured per policy year | One-time lump sum on the first confirmed diagnosis of a listed critical illness |
| Typical inclusions | IPD, day-care, room rent (limits may apply), ICU, surgery, ambulance; OPD if add-on | Illnesses defined in policy wording (e.g., specified stages of cancer; myocardial infarction; stroke; kidney failure; major organ transplant) |
| Policy term | Usually 1 year, renewable for life | Fixed term (e.g., 5/10/20 years) or up to an exit age; many policies terminate after full payout |
| Waiting periods | Initial ~30 days; disease-specific 1-2 yrs; pre-existing 2-4 yrs; maternity often 9-36 months | Initial ~90 days common; survival period typically 14-30 days post diagnosis (wording-specific) |
| Claims | Cashless at network hospitals or reimbursement | Lump sum paid to the insured; free use (non-medical costs, income gap, EMIs, travel) |
| Premium pattern | Higher premiums due to comprehensive coverage for various medical conditions, hospitalisation, surgery, and tests | Relatively lower premiums, as coverage is limited to specific critical illnesses |
| Sum insured (indicative) | Typically ranges from ₹5 to ₹10 lakhs | Typically ranges from ₹5 to ₹50 lakhs |
| Who’s covered | Individual or family floater (shared SI) | Individual (each member needs their own CI policy) |
| After a claim | Policy continues for the remaining SI; some plans have restoration features | Often ends after full payout (unless multi-claim variants) |
Please note: Ranges and features vary by insurer. Always read the policy wording.
Which One Should you Buy Health Insurance or Critical Illness Cover?
Short answer: start with health insurance. Without it, a single admission can drain savings. Then consider CI to protect income and cover non-medical costs during long recovery.
When CI makes special sense
- You’re the primary earner or self-employed.
- You have EMIs and dependents.
- Family history of major illnesses.
- You prefer a clear cash buffer for 6–12 months if you need time off work.
Simple decision flow
- Build a base health cover (₹5-10 lakh for an individual; ₹10-20 lakh for a young family).
- Add a top-up/super-top-up to push total cover higher in a cost-efficient way.
- Add CI sized roughly to 6-12 months of expenses + EMIs + recovery extras.
Real-world Examples in India around Health Insurance vs Critical Illness Cover: Key Differences
A. Heart attack at 42 with EMIs
Rohan has ₹10 lakh base health + ₹40 lakh top-up. He also holds ₹25 lakh CI.
- Hospital bills: ₹7.8 lakh. Settled under base/top-up (cashless).
- CI payout: ₹25 lakh after the survival period. He covers 6 months of income gap, cardiac rehab, and EMIs.
- Lesson: health cover pays bills; CI stabilises household cash flow.
B. Cancer diagnosis needing multiple cycles
Ananya holds a ₹20 lakh base with restoration and ₹20 lakh CI.
- Medical bills: covered via base + restoration benefits.
- CI payout: finances home help, travel to a centre of excellence, and downtime from work.
- Lesson: Treatment is long and expensive; CI removes pressure to return to work too soon.
C. Chronic kidney failure with dialysis
Mr. Mehta holds ₹10 lakh base (+ recharge) and ₹30 lakh CI.
- Recurring dialysis: covered under health insurance until SI is exhausted/restored.
- CI payout: provides liquidity for lost income and long-term planning.
- Lesson: Ongoing illnesses hit both bills and income using both covers is safer.
Costs and Pitfalls to Watch
1. For health insurance
- Room-rent caps: higher room categories may trigger proportionate deductions.
- Disease sub-limits: caps for specific surgeries; read the fine print.
- Co-pays: age-based or city-tier co-pays reduce claim payouts.
- Cashless vs reimbursement: cashless is smoother at network hospitals; carry ID and e-card.
- Waiting periods: initial 30 days; disease-specific and PED waiting periods can be 1-4 years, depending on product. (Check your policy wording.)
2. For CI
- Exact definitions matter: benefits trigger only at policy-defined severity/stage (e.g., certain cancer stages).
- Initial waiting: typically about 90 days from policy start for CI claims.
- Survival period: commonly 14-30 days after diagnosis.
- Single vs multi-claim: many CI policies terminate after full payout; some new variants allow multiple events to read the wording.
Conclusion
Health insurance and critical illness cover do different jobs—and they work best together. Health insurance pays eligible hospitalisation and treatment bills up to your sum insured for the year, while critical illness cover pays a lump-sum benefit on a policy-listed diagnosis that you can use for income support and non-medical costs. For most families, the safer stack is a solid base health insurance plan, a cost-efficient top-up/super top-up, and a critical illness layer sized to a few months of expenses and EMIs.
At Even, we wrap your cover with 24×7 doctors, specialist consultations, preventive check-ups, and hands-on claims support so care is simpler before, during, and after treatment.
FAQs around Health Insurance vs Critical Illness Cover: Key Differences
Q: What’s the basic difference?
A: Health insurance pays eligible bills up to your sum insured for the year. CI pays a lump sum on the first confirmed diagnosis of a listed serious illness, as per policy wording.
Q: Can I hold both policies and claim both?
A: Yes. One policy settles hospital bills (cashless/reimbursement). The other pays a lump sum you can use for non-medical costs or income gaps.
Q: Can families buy CI as a floater?
A: No. CI is usually individual-only. If two adults want CI, each holds a separate policy. (Your health policy, however, can be a family floater.)
Q: How long do I have to wait before claiming?
A: Health insurance has an initial ~30-day wait (emergencies excluded), plus disease-specific and PED waits. CI typically has ~90 days of initial waiting and a 14-30 day survival period after diagnosis (see your policy wording).
Q: Are premiums tax-deductible?
A: Premiums for stand-alone health and CI policies generally qualify for Section 80D deductions under the old tax regime, with higher limits for senior citizens; always confirm details for your case.
Q: Is cashless guaranteed everywhere?
A: Cashless applies at network hospitals per policy terms. Outside the network, you usually claim via reimbursement. Check your insurer’s network list before admission.