Know the Difference: Critical Illness Plan vs Health Insurance Plan

While more and more individuals are realising the importance of covering themselves and their families with the right insurance, many are perplexed when it comes to critical illness cover as they think it is similar to health insurance and hence do not consider buying it. This article elucidates the key differences between a critical illness plan and a health insurance plan to help you make sure you buy the right coverage as per your health requirements.

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What is a Health Insurance Plan?

Health Insurance is a type of insurance that provides coverage against any medical emergencies arising out of an injury, illness, or accident. Health insurance extends its coverage to medical expenses, such as hospital bills, medicines, consultation fees, etc.

A health insurance policy can be bought for a specific period by paying a monthly or yearly premium. The three major deciding factors of health insurance premiums are - age of the insured, sum insured, and health habits.

There are several types of health insurance plans, and you can choose from them based on your health requirements. Here are some common types of health insurance plans:

1. Individual Health Insurance:

Individual health insurance plans are designed for the coverage provided only to a single person. So, if you want to cover all your family members, you will need to buy a separate policy for each member. The plan is ideal for single men and women and members who are not eligible for family floater health insurance.

2. Family Floater Health Insurance:

As the name suggests, family floater health insurance is a health insurance plan specifically made to cover an entire family under one roof. Since it is a single policy, you pay a single premium that provides coverage to multiple members. The coverage is distributed to all the insured members. Therefore, it can be used by a single person or multiple persons in a policy year. The family floater plan is ideal for small families with two adults and 0-3 children.

3. Group Health Insurance:

Most companies provide health insurance coverage to their employees through Group Health Insurance. Insurance companies offer these plans at affordable premiums, which are paid by employers. The employee can utilise the benefits of the policy as long as s/he is working in the same company and provided the company has not discontinued the coverage.

What are the benefits of having a Health Insurance Policy?

• It pays and/or reimburses the medical expenses and hospital bills of the insured members, as mentioned in the policy document.

• If you avail of treatment in a network hospital of the insurance company through a cashless claim, you do not have to pay anything from your pocket. In other words, the insurance company will directly settle the amount with the hospital; you just have to show the cashless card to the hospital.

• If you would like to go to a hospital of your choice which is not a part of your insurer's network hospitals, you can claim the amount later with the original hospital and medical bills.

• Most health insurance companies provide coverage against treatments done under AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha, and Homeopathy).

• Usually, health insurance plans cover pre-hospitalisation expenses of 30 days and post-hospitalisation expenses of 60 days, including treatments done under AYUSH.

• Some critical illnesses are covered under basic health insurance policies.

• Many insurers provide medical coverage with a condition of a minimum of 24 hours of hospitalisation, but nowadays, many insurers have included certain day-care treatments that do not require hospitalisation.

What is a Critical Illness Insurance Plan?

Critical Illness Insurance provides coverage against life-threatening critical illnesses, such as paralysis, cancer, heart attack, etc. It typically offers a lump sum payment to the insured on a diagnosis of any of the listed critical illnesses. Critical illness can happen to anyone anytime, so getting critical illness insurance at the right time can secure you from uncertainties.

Here are the key features of Critical Illness Insurance:

1. The Critical Illness Insurance Policy can be purchased as a standalone policy or as a rider with a basic health insurance policy or life insurance policy. Hence, both life insurance companies and health insurance companies offer critical illness policies.

2. It offers coverage in the form of a fixed lump sum on survival of 30 days post-diagnosis of the critical illness.

3. Critical illness insurance policies usually have a waiting period of 30 to 90 days. Hence, any diagnosis done before the completion of the waiting period will not be eligible to file a claim.

4. Since the sum assured is paid in a lump sum, you can use the remaining amount for any of your requirements after paying for your medical treatment.

5. You can avail of a tax benefit of up to Rs 25,000/- under Section 80D of the Income Tax Act, 1961, for self, spouse and children. Similarly, senior citizens can avail of a tax benefit of up to Rs 50,000/- annually.

6. If your parents are above the age of 60, and you get a critical illness insurance for them, then you can claim a maximum tax benefit of Rs 75,000/-; i.e. 25,000/- for self and 50,000/- for parents. If you are above 60 and buy a critical illness cover for your parents, then the maximum tax benefit will be Rs up to Rs 1,00,000/-

7. You can also buy multiple critical illness covers and claim for them in case of an unfortunate event.

8. The insurance companies in India typically cover 35 to 36 critical illnesses. The list of such illnesses may vary from insurer to insurer, but here are some of the common dread diseases that are generally covered under critical illness cover:

• Cancer

• Kidney Failure

• Primary Pulmonary Arterial Hypertension

• Multiple Sclerosis

• Major Organ Transplant

• Coronary Artery Bypass Graft

• Aorta Graft Surgery

• Heart Valve Surgery

• Stroke

• Coma

• Total Blindness

• Myocardial Infarction (First Heart Attack)

• Paralysis

This list is given only for your understanding of insurable critical illnesses. Before purchasing any critical illness policy, it is advisable to check with the insurer about the list of critical illnesses covered under the policy.

What are the key differences between Health Insurance Cover and Critical Illnesses Cover?

Which is better - Health Insurance Plan or a Critical Illness Insurance Plan?

As discussed earlier, Health and Critical illness insurance plans; serve different purposes. Buying any of these plans or both depends upon the insured's medical history and current medical state. As we all know, no one can predict a medical emergency. Hence, sufficient health insurance coverage is imperative to avoid liquidating your investments or opting for a loan. Similarly, the number of cases of critical illnesses has been increasing over the years due to the fast-paced lifestyles, which creates a need for the right critical illness cover. Due to the online availability of these insurance plans and increased competition in the market, health insurance and critical insurance plans are available at attractive premiums. It is advisable to compare different plans and different insurers in terms of premiums, coverages, other benefits, ease to purchase and renew, network hospitals, etc. and choose the right plans for you and your loved ones.

Warm Regards,
Ketki Jadhav
Content Writer