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Critical Illness Insurance Plan Vs. Health Insurance Plan
by SMCIB on Saturday, 17 June 2023
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In this day and age, we simply cannot deny the possibility of getting an illness or injury - especially with today's fast-paced lifestyle. Despite our best efforts to stay healthy, the risks of illness and injury exist. The financial and emotional consequences of a severe illness or uncertainty can be devastating. To mitigate such risks, a health insurance plan is essential to ensure that you have the financial security needed to cope with these unfortunate events. While a health insurance policy can be a reliable source of financial assistance when you need it the most, how about expenses that go beyond hospitalisation?
In case of critical illnesses such as cardiovascular disease, cancer etc., the treatment may be expensive and long-term. It may even require you to quit your job. With a subsequent loss of earnings, how will you manage the expenses? This can have a devastating effect on your and your family’s life, both because of the illness and the financial implications.
This is where critical illness insurance plays an important role. The plan specifically provides financial protection against critical illnesses.
Having said that, you may wonder whether you should purchase a simple health insurance policy or critical illness insurance that covers you against potential critical illnesses. This lingering doubt can be dispelled by knowing the differences between a health insurance plan and critical illness insurance.
Let's get started!
What Is Health Insurance? How Does It Work?
Health insurance is essentially a contract between you and the insurance company where the insurer agrees to cover expenses incurred for hospitalisation, treatments, surgeries, etc. in exchange for the premium you pay. The insurer will either settle the expenses directly with the hospital on your behalf or reimburse you, depending on where you get treated and the type of claim you make.
Types of Health Insurance Plans
There are many varieties of health insurance plans available in the insurance market. Some of them include -
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Individual Health Plan: One of the popular health insurance policies is an individual health insurance plan. Under this policy, a single individual has access to the entire sum insured.
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Family Floater Plan: A family floater plan covers an entire family under one policy. In this policy, the sum insured is shared among family members. Compared to individual health plans, floater plans can offer lower premiums and are simpler to manage.
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Multi-Individual Health Plan: Under this policy, you can choose separate cover amounts for you and your family members. In the event of hospitalisation, each of the members covered will have access to their allocated sum insured. This policy is a viable option for joint families who want to cover relatives that aren’t eligible under a family floater or if you want to ensure that each family member has a set cover amount.
Note: Besides these, there are other types of health insurance plans available in the market as well such as top-up plan, super top-up plan, senior citizen health insurance plan, etc.
Let’s Understand The Concept Of Health Insurance With An Example
Mehak buys an individual health insurance plan with a sum insured of Rs 10 lakhs. She requires kidney surgery costing around Rs 7 lakhs. Since she is covered under a health insurance plan, the insurer will pay for her hospitalisation expenses. And, the remaining Rs 3 lakhs will be available for the remaining policy year. In case Mehak requires hospitalisation again in the same year, she can make use of it.
What Is A Critical Illness Insurance? How Does It Work?
Critical illness insurance is primarily designed to protect you against expenses you incur if you’re diagnosed with a critical illness listed in the policy document. The policy offers you a lump sum amount that can help you meet expenses such as long-term medical treatments, lifestyle modifications, medical equipment for assistance, etc. Moreover, you can make use of this amount if you wish to take medical treatment abroad as well.
As mentioned earlier, your critical illness diagnosis may require you to take time off work for treatment. And, if you are the sole breadwinner of the family, your sudden income loss may take a toll on your family financially. In that case, the lump sum can serve as an income replacement for your family to pay for loan EMIs, household expenses and children’s school fees and other financial needs.
Please remember that the insurer will terminate your policy once the payment is made.
Let’s Understand How Critical Illness Insurance Works With An Example
Rahul buys critical illness insurance with a sum assured of Rs 15 Lakhs. A few years later, he is diagnosed with lung cancer, which is a listed critical illness. The cost of treatment including surgery and radiotherapy comes to around Rs. 12 lakhs. Since Rahul has critical illness insurance, the insurer will provide him with a lump sum of Rs. 15 lakhs. Using this amount, Rahul can pay for his treatment expenses and use the rest for his other financial needs.
Now, that we understand what health insurance and critical illness insurance are, let’s discuss how they differ in various aspects -
| Aspects | Critical Illness Insurance | Health Insurance |
|---|---|---|
| Coverage |
Critical illness insurance covers critical illnesses that are listed in the policy document like heart attack, cancer, etc. The scope of coverage varies across insurers. |
Health insurance policies cover medical treatments because of any illness, injury, or accident. A wide range of medical conditions falls within the ambit of their coverage. They also cover pre and post-hospitalisation expenses, daycare treatments, domiciliary treatments, maternity costs, alternative treatments, and more. |
| Premium |
Usually lower - the premium depends on the illnesses covered by the plan. Note: The premiums will vary across insurers and products. |
Usually higher - the premium depends on your age, sum insured, and other factors. Note: The premiums will vary across insurers and products. |
| Benefits |
The policy offers a lump sum in the event of a critical illness diagnosis. |
The policy offers a lot of benefits like cashless treatments, no claim bonus if you don’t make any claims in a year, restoration of sum insured if it gets exhausted, etc. |
| Types Of Expenses Covered |
The policy provides you with a lump sum in the event of a critical illness diagnosis regardless of the medical expenses incurred. You can use the money for treatments, lifestyle changes, income replacement, etc. |
The policy covers eligible hospitalisation expenses such as room rent, consultation fees, nursing charges, etc. |
| Waiting Period | The waiting period is usually 90 to 180 days from the policy's inception. It varies across insurers | Generally, there are three types of waiting periods involved. An initial waiting period of 30 days where you cannot claim for any condition except for accidents. A 2-4 year waiting period for pre-existing diseases as well as specific treatments specified by the insurer. |
| Validity | The policy remains valid until a claim is made or the policy’s date of expiry. | The policy will remain valid until the sum insured gets exhausted or until the date of policy expiry. |
| Survival period | The policy will provide coverage only if you get diagnosed and survive the illness for a specified period called the ‘survival period’. This period typically ranges from 15 to 30 days - as per the conditions of the policy. This period will vary across insurers. | There is no survival period. |
Wrapping up!
So, these are the differences between a health insurance policy and critical illness insurance. A health insurance plan is a must-have for anyone who wants to ensure their own and their family's well-being. For those who have a history of critical illness or want to be extra secure against critical illnesses, investing in critical illness insurance makes sense. Regardless, the common goal of both these policies is to give you peace of mind, allowing you to focus on recovery and not worry about the cost of treatment.
