Difference between Critical Illness Insurance and Normal Health Insurance?

The health insurance market is flooded with several options for those seeking financial cover in the face of a medical emergency. One of the many health insurance options is critical illness insurance, which policyholders sometimes misunderstand as regular health insurance. Today, we will discuss the key differences between critical illness policy and regular health insurance. To begin with, let us first look at them in detail.

What is the critical illness insurance policy?

Critical illnesses refer to a life-threatening medical condition. Their treatment can take months or even years, which can significantly impact your saving. If you think that your basic health plan is enough to cover the medical expenses of such treatment, then you are wrong. It will not cover your repeated hospitalisation, regular screening and doctor visits required for critical illnesses. A critical illness insurance is specifically designed to provide you with a lump sum payment that can help you cope with such hefty medical expenses on being diagnosed with a critical illness.

For an in-depth understanding, let’s take an example.

Suppose Shyamal is diagnosed with cancer, and to treat this condition, she needs to undergo surgery, chemo or radiation therapy and be on medications. Say, the approximate amount for these procedures will cost Shyamal ₹12 lakh. On the other hand, Shyamal has a critical illness insurance policy with a sum insured of ₹10 lakh. In this case, Shyamal will have to pay only ₹2 lakh out of her own pocket. The insurer will provide₹10 lakh as a lump sum to her. However, Shyamal could have received treatment without having to pay anything out of pocket if she had purchased a critical illness insurance policy with a sum insured that equals or is more than ₹12 lakh in this case.

What is normal health insurance?

A health policy offers financial protection in the event of a medical emergency. It is a contract between an insurer and a policyholder in which the insurer, in exchange for a premium, pays for the insured person’s in-patient hospitalisation, pre and post-hospitalisation, and other medical costs. The policy is usually issued for one year, following which the policyholders must renew it.

Some of the health insurance plans are individual health insurance, family floater plan, and group mediclaimpolicy.

Critical illness insurance vsregular health insurance: Key differences

Parameters  Critical Illness Insurance  Normal Health Insurance 
Coverage The purpose of this policy is to cover only life-threatening illnesses. Critical illness insurance has a limited scope of coverage compared to standard health policies. Regular health plans cover hospitalisation for diseases, accidents, pre-existing illnesses, and so on. You can also enhance their coverage further by opting for add-ons that cover donor expenses, maternity expenses, critical illnesses, etc.
Claim payout  The insurer pays you once you have been diagnosed with a specific critical illness listed in your policy’s inclusions. You are free to utilise the claim amount as you see fit. The insurer will settle your bill with the network hospital if you make a cashless claim in a regular health plan. In case of a reimbursement claim, you will need to pay the hospital bill first and then share it with the insurer, who will later transfer the approved claim amount to you.
Premium The insurer determines the critical illness policy premium based on the number of critical illnesses covered and the amount of sum insured that the policyholder chooses. The insurer determines the premium of regular health insurance based on the sum insured, type of plan, add-ons, and the number of members to be covered under the policy.
Waiting Period With most health insurance providers, the waiting period for critical diseases specified in your policy is normally 90 days from the start of your policy date. The waiting period varies from one insurer to the next. In most cases, the waiting period for pre-existing conditions and maternity benefits might last anywhere from one to four years.
Survival Period It refers to the period within which policyholders must survive after being diagnosed with a serious illness. Usually, the survival period with most insurers ranges between 14 and 30 days. There is no such period in the case of a regular health insurance plan.
Policy Status Critical illness insurance is valid until itexpires or the policyholder raises a claim request, whichever is earlier. Regular health insurance plans are valid until they expire or the covered person uses up the entire sum insured, whichever is earlier.

The sole thing you should consider while deciding between these two policies is your existing medical situation. Both of these policies come with their own set of advantages. However, if you have a family, obtaining both basic health insurance and critical illness insurance is a good idea.

 

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