Health insurance vs critical illness

Health InsuranceWhen Kunal was diagnosed with multiple sclerosis, he was devastated. Above all, he thought the health insurance would take care of the expensive medical treatment that he would need on a regular basis, but his health insurance advisor informed him that his health insurance would cover only his hospitalization expenses.

Kunal was feeling helpless and the emotional and financial pressure was further affecting his health. His hospitalization expenses were covered but as his health suffered, he could not concentrate on his business and his financial health went for a toss.

If Kunal had taken a timely decision and purchased a critical illness policy, he would receive a lump sum amount of money (fixed by the insurance provider at the time of buying the policy) that would help him tide away the financial crisis. 

There are many individuals like Kunal who fail to understand that health insurance and critical illness are two entirely different policies that are designed to serve different purpose. 

Let’s understand the differnce between between health insurance and critical illness cover.

Basic features:

Health insurance is a comprehensive plan that covers hospitalization expenses however; some Private health insurance providers cover maternity benefits, OPD expenses also. 

On the other hand critical illness policy as the name suggests covers only life threatening diseases as listed by the health insurance provider. For instance, multiple sclerosis, cancer, kidney failure, blindness, CABG (Coronary Artery Bypass Graft surgery etc) 

Nature of insurance: 

Health insurance or mediclaim is an annual contract where the policy must be renewed every year. On the other hand, critical illness policy is taken for a long period of time, usually 10 -20 years.

Benefits:

Health insurance or mediclaim is a plan where the insured individual can reimburse the expenses incurred in hospitalization on producing the bills. The insured individual can also opt for the cashless facility at the network hospital and the hospital bills are directly settled by the insurance company or the TPA. The health insurance policy can be renewed every year and the policy continues even after you have made a claim.

Critical illness is a defined benefit policy where the insurance provider pays out a tax free lump sum once the insured individual is diagnosed with a pre specified critical illness.

The advantage of the critical illness policy is that hospitalization is not necessary for critical illness cover, diagnosis is enough. The insured individual does not have to submit original bills and claims can be made with photo copies. The insured individual receives the entire amount at once and can spend the amount way he likes. However, the flip side is that it is a one time payment, which results in the termination of the policy when there is a claim. 

Coverage: 

The major difference between a health insurance policy and a critical illness policy is that scope of coverage in a healthcare insurance policy is quite wide whereas critical illness policy is restricted in coverage. 

Heath insurance takes care of hospitalization due to accidents or various ailments. 

Critical illness policies are restricted in coverage. Critical illness policy covers around 6 to 12 diseases. However, the critical ailments covered under the policy differ from insurer to insurer. It usually covers critical illnesses such as cancer, heart attack, diabetes, kidney failure, multiple sclerosis, major organ transplant diagnosed after buying the policy. It also takes care of circumstances not covered under a health insurance such as postoperative care, temporary loss of pay, travel, and boarding. It is important to note that this plan strictly adheres to the conditions laid in the policy wordings and offers cover under the specific ailments mentioned in it.

Waiting Period: 

Health insurance policies have a waiting period during the first 30 days from the policy inception, except the ones that are accident related. Pre existing ailments are covered after 1-4 years of continuous coverage with the insurance company. 

Critical illness policy have a waiting period of 3 months i.e. there is no cover for those diagnosed with any critical illness during the first 3 months of buying the plan.

The cover is generally not allowed if the insured individual expires within 30 days of the illness being diagnosed. 

Who should buy the policy? 

Health insurance policy is advised to everyone young or old. It is suggested that you buy the policy early in life to derive its various benefit.

It is advisable to buy a critical illness cover after you cross 35 or earlier if there is a history of critical illness in your family.

Which is better health insurance or critical illness policy? 

Both the policies are different in nature and hence cannot be compared. One policy cannot be a substitute of the other. However when taken in conjunction they can boost one’s health insurance cover.

While a health insurance helps to foot medical bills a critical illness cover would shield your finances from any major illnesses. 

Thus, health insurance policy as well as critical insurance policies have their own advantages ideally one should buy a health insurance and a critical illness policy to avail a wider coverage and secure their future against unanticipated medical emergencies.