Difference Between health insurance and critical illness

Last week I was reading the newspaper when an article caught my attention. Apparently, more and more Indians were becoming a victim to various types of non-communicable diseases. Hypertension, diabetes, pulmonary disorders, cancers of different organs, etc. were becoming alarmingly common according to the article. While the article highlighted the burden of diseases on the Indian population, another thought ran parallel in my mind – medical inflation. The cost of medicine is touching the roof and given the increasing probability of illnesses, a financial crisis is evident. A health insurance plan becomes important to combat this financial crisis. Moreover, there are critical illness plans too which prove beneficial in major illnesses. But, most of us consider health plans and critical illness plans same and interchangeable. Are they?

They are not and if you have any doubt, here is a brief understanding of a health insurance plan and a critical illness plan along with the differences between the two. Read on:

Health insurance plans

Health insurance plans offer an exhaustive scope of coverage. Some common expenses covered in all health plans include in-patient hospitalization, pre and post hospitalization, day care treatments, ambulance costs, organ donor expenses, etc. A health plan is designed to cover all expenses related to a medical emergency which requires hospitalization.

Critical illness plans

Critical illness plans provide coverage for a specified list of illnesses mentioned in the policy contract. If you get diagnosed with any illness covered by the plan a lump sum benefit is paid which is equal to the Sum Insured selected.

Difference between health insurance and critical illness plans

Though a critical illness plan is a type of health insurance plan, it has major differences when compared to a health insurance plan. Let’s understand the differences:

  • Coverage provided

A health insurance plan has a list of coverage features. It covers all your medical expenses right from being transported to the hospitalization through an ambulance, to being treated and recuperating at home after being discharged. Moreover, coverage for AYUSH treatments, domiciliary hospitalization, restoration of Sum Assured, maternity expenses, etc. is also provided by various plans. These coverage features are absent in a critical illness plan. The plan only covers specified illnesses and nothing more.

  • Sum Insured

Health insurance plans allow a higher coverage amount compared to critical illness plans. There are health plans where the allowed Sum Insured goes as high as Rs.5-6 crores. However, critical illness plans do not have such high coverage. Under critical illness plans, the maximum Sum Insured levels range between Rs.10 lakhs and Rs.25 lakhs.

  • Benefit structure

Health insurance plans are indemnity plans which pay the actual cost of hospitalization. In case of a claim, you have to submit your medical records and all relevant bills. The insurance company then pays the costs incurred subject to a maximum of the Sum Insured. Critical Illness Plans, on the contrary, are fixed benefit plans. These plans pay the Sum Insured if you are diagnosed with any covered illness. The benefit payout doesn’t depend on the actual expenses incurred. The money received from a critical illness plan can be used to meet any expenses whether you want to pay off your liabilities or receive the best treatment. However, the claim received under a health plan is solely for the medical costs incurred and cannot be used for any other purposes.

  • Premiums

Since health insurance plans offer a more exhaustive coverage, the premiums they charge are, naturally, higher. Critical illness plans, on the other hand, are cheaper than health plans in terms of premiums.

Now you see how a critical illness plan and a health insurance plan are different from each other? So which one should you buy?

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A health insurance plan is imperative given its coverage features. It provides an all-round coverage for your medical contingencies and is a must. A critical illness plan can be taken as an additional coverage option. It would give you an additional coverage against the financial crisis faced in case of a critical illness. However, a health plan cannot be substituted for a critical illness plan. It is a necessary cover and should be given first preference. Read more why choosing a right policy is essential.

Read also What is insurance and how does it works?

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Why opt for a higher sum insured in your health insurance plan?

The National Sample Survey Office conducted two surveys on medical incidences and their costs. The first one was conducted in 2004 while the second was in 2014. The results were surprising and disappointing. According to the reports, about 3% out of 1000 Indians faced hospitalization in 2004. The number increased to 4.4% in 2014. Not only did the incidence of hospitalization increase, treatment costs too saw a spike in the decade. The hospitalization cost increased by about 176% for an urban individual. Disappointing, isn’t it? (Source: https://qz.com/663718/charted-the-incredible-rise-in-the-cost-of-healthcare-in-india/ ). Moreover, even the common ailments, nowadays involve huge expenses. See for yourself:



(Source: https://economictimes.indiatimes.com/the-rising-cost-of-medical-treatment-infographic/tomorrowmakersshow/50187991.cms )

Whew! Can you afford a medical emergency knowing the costs involved?

Given the financial crisis faced in a medical emergency, people buy health insurance plans. But, most of them make a mistake of choosing a low Sum Insured. Is it wise?

Read more about 6 tips to reduce health insurance premiums

The health insurance plan compensates you up to the maximum extent of the Sum Insured you have selected. Thus, it is always recommended to choose a higher Sum Insured in your health insurance plan. If the above medical costs were not reason enough, here are some more for choosing a higher Sum Insured:

You can protect your savings

In life you have various financial goals for which you save. You might save for financing your child’s education, for buying a home or car, for your child’s marriage or for your retirement. If you encounter a medical contingency, you would face huge medical bills. If you have a health plan with a lower Sum Insured you would have to draw upon your savings to pay for the costs not paid by your health plan. In such a situation, not only your goal-planning goes out the window, your savings are drained and you have to start from scratch. Would you want that?

Higher Sum Insured gives sufficient coverage for family members

If you have a family floater plan, having a higher Sum Insured becomes all the more important. Since your family shares the Sum Insured of your health plan, in case of multiple claims in the same year a lower Sum Insured would fall short. If you opt for a higher Sum Insured, you can be assured that your family members would be sufficiently covered under your health plan.

Read more about family floater plan

Is a higher cover affordable?

Though you might understand the importance of having a higher Sum Insured, you might find affordability to be a hindrance. After all, a higher Sum Insured entails a higher premium too. This affordability issue can be resolved if you opt for top-up or super top-up plans.

What is a top-up plan?

A top-up plan is a health insurance plan which increases your Sum Insured without pinching your pockets. Under a top-up plan there is a Sum Insured and a deductible limit. If any health claim exceeds the deductible limit, the top-up plan pays the claim.

For instance, if you buy a top-up plan of Rs.5 lakhs with a deductible limit of Rs.2 lakhs, in case of any claim which is more than Rs.2 lakhs, the top-up plan would be applicable. So, if you incur a claim of Rs.2.5 lakhs, the top-up plan would pay Rs.50, 000.

What is super top-up plan?

Super top-up plan works like a top-up plan. The only difference is while a top-up plan considers each instance of claim against the deductible limit, a super top-up plan aggregates the claims incurred in a year and then matches it against the deductible limit.

For instance, you buy a super top-up plan of Rs.5 lakhs where the deducible is Rs.2 lakhs. If you incur a claim of Rs.1 lakh, nothing would be paid in both top-up and super top-up plans. In the same year, if you incur another claim of Rs.1.5 lakhs, the top-up plan would pay nothing. But, the super top-up plan would pay Rs.50, 000 because the aggregate claims (Rs.1+1.5 lakhs) exceed the deductible of Rs.2 lakhs.

Top-up or super top-up plans can be taken to supplement your coverage level. If you have an existing health plan, choose a top-up or super top-up plan in such a way that the Sum Insured of your existing health plan is equal to the deductible limit of your top-up or super top-up plan. In that case, any claims up to the deductible limit would be paid by your normal health plan and any excess by your supplemental plans.

A higher Sum Insured is necessary in a health insurance plan if you want to combat the high medical costs. So, choose a health plan with an optimal coverage level based on your needs. If affordability is a concern, choose top-up and super top-up plans but don’t shirk on the coverage.Here is why health insurance is necessary.

Read also An anatomy of an health insurance plan

Read more about Dejargonizing health insurance terms

Feel free to share your comments below

Difference between critical illness and life insurance policy

Insurance has become an integral part of our financial plan given the coverage benefit it provides. An insurance policy compensates us against any financial loss faced due to premature death, ill-health and other unforeseen emergencies. A life insurance plan and a critical illness plan are two important insurance plans which find relevance in our lives. While a life insurance policy covers us against the risk of premature death, a critical illness plan provides financial assistance in case we suffer from a critical illness. While both these plans are important, are they same?

Comparing a critical illness plan with a life insurance one is like comparing apples and oranges. While both are insurance plans covering specific risks, they are very different from one another. Let us understand how?

What is life insurance?

Life insurance is an insurance policy which primarily covers the risk of premature death and the financial loss suffered thereof. The policyholder chooses the plan tenure and the coverage amount. If the life insured dies during the chosen tenure, the chosen Sum Assured is paid. If, the plan matures, the maturity benefit would depend on the type of plan selected.

What is critical illness plan?

A critical illness plan is a health plan under which specified critical illnesses are covered. If the insured suffers from any of the covered illness during the term of the plan, the chosen Sum Insured is paid.

Read more about benefits of critical illness policy

Difference between the two

A life insurance plan and a critical illness plan are two different plans which cover different risks. Here are some important points which highlight the differences between a critical illness plan and a life insurance one:

  • Contingency covered

A life insurance plan pays a benefit if the life insured dies during the term of the plan. Thus, it essentially covers the risk of premature death.

A critical illness plan, on the other hand, covers the risk of suffering a critical illness.

  • Coverage amount

There is, usually, no upper limit in choosing the Sum Assured under life insurance plans. The minimum Sum Assured usually starts from Rs.50, 000 or Rs.1 lakh and there is no maximum limit. Moreover, the Sum Assured for life insurance policies should be selected based on one’s financial requirements.

Critical Illness plans impose a limit on the Sum Insured offered. The maximum allowed Sum Insured is, usually, around Rs.10 lakhs – Rs.25 lakhs. The choice of the Sum Insured depends on the policyholder and should be done based on the expected medical costs which would be incurred in case of suffering any major illness.

  • Plan variants and need fulfillment

Life insurance plans come in different variants. There are term insurance plans, traditional endowment and money back plans, pension plans, market-linked ULIPs, children plans, etc. While term plans help in income replacement, pension plans build a retirement corpus. Child plans help create a secured financial future for the child while ULIPs fulfill the need of wealth creation. Thus, different life insurance plans fulfill different needs and the policyholder can choose any type of plan as per requirement and financial need.

Here is how life insurance works

There are no variants of a critical illness plan. The only notable difference between different critical illness plans is the list of illnesses covered. Different plans cover varying number of critical illnesses. Moreover, critical illness plans do not fulfill any other need except providing funds for facing a critical illness.

  • Benefits paid

A life insurance plan pays a death benefit or a maturity benefit. The benefit might be paid in lump sum or, if chosen, in instalments (annual or monthly). Moreover, various plans also pay bonus and loyalty additions.

A critical illness plan pays a lump sum benefit only if the insured is diagnosed with any of the covered illnesses. There is no maturity benefit payable under these plans.

Here are the benefits of a critical illness plan

  • Term

Life insurance plans are long term plans ranging from a term of 5 years to whole of life. Critical Illness plans, on the other hand, are offered as one-year plans and can be taken for a continuous period of 2 or 3 years too.

  • Premiums

Since life insurance plans provide a wider scope of coverage, the premiums are higher than those charged for critical illness plans.

  • Tax benefits

How can we forget tax benefits of insurance plans? In case of life insurance plans, premiums paid are tax-free under Section 80C and the benefits received are tax-free under Section 10 (10D). There is an upper limit on the exemption of premiums and the limit is Rs.1.5 lakhs.

Premiums paid for critical illness plans are tax-free under Section 80D. The maximum exemption allowed is up to Rs.60, 000 if you also cover your dependent parents who are senior citizens.

So, life insurance plans and critical illness plans are widely different from each other. You cannot substitute one for the other. Both these plans serve a different need and should be included in your financial portfolio.

Read more about Separate health insurance plans for parents of floater?

Read also An anatomy of an health insurance plan

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Play safe this Monsoon with the umbrella of health insurance

Don’t you just love the monsoons – the heavy clouds that bring respite from the scorching heat, the cool showers that uncover the real shades of green, and the light breeze, which carries the smell of wet earth?

Although monsoons are such a welcome change from the long, hot and dry spell of summer, unfortunately, they often arrive accompanied by some very unwelcome health hazards.

Accident risks during monsoons

During heavy showers, the incidence of road mishaps multiplies dramatically, leading to a lot more deaths, serious injuries, and loss of property. Mumbai alone recorded 569 accidents last year!

(Click here to find out about personal accident cover!)

Auto accidents are common during monsoon due to decreased visibility, slippery roads, water-logging, undetectable potholes, and falling trees; often in combination with reckless driving or poor vehicle maintenance.

(Want to learn how to monsoon-proof your carClick here to keep the monsoons from raining on your car-parade!)

Health risks during monsoons

Not only do clogged waters and muddy puddles result in a higher risk of road accidents and personal injuries, they also serve as a breeding ground to a host of disease-causing germs. What’s more, your body is extremely susceptible to various ailments during the monsoon season due to reduced immunity.

The high humidity and damp accelerate bacterial and fungal growth, leading to outbreaks of serious infections and diseases such as influenza, pneumonia, asthma, typhoid, cholera, hepatitis, dysentery, conjunctivitis, leptospirosis, etc. Moreover, mosquitoes thrive on stagnant water (which accumulates in abundance in monsoons) and cause dangerous diseases like dengue, malaria, and chikungunya.

How health insurance protects you

Coping with an unforeseen illness or injury can be undesirable as it is. But, having to shell out your hard-earned money for medical assistance on top of that, just makes the whole situation worse. Healthcare for most monsoon illnesses alone can be very expensive, with long durations of treatments and hospitalization ranging upwards of Rs. 35,000 in multispecialty hospitals. Health insurance coverage acts as a financial umbrella against the dangers of monsoon and safeguards you and your family by mitigating the cost of medical care and providing benefits like cashless hospitalization.

Here are 4 reasons why health insurance is important

Disease-specific plans

Nowadays, there are many health insurance companies in the market that provide disease-specific covers. The great thing about these plans is that their premiums are quite affordable. You can get a cover of around Rs. 50,000 for monsoon-specific diseases and accidents for as little as Rs. 511!

Even if you have a regular health insurance plan, you might want to consider getting a specialized plan as an add-on cover. This will let your basic plan’s No Claim Bonus remain undisturbed. If need be, you can always claim the disease-specific plan simultaneously with your existing health insurance plan.

Moreover, most disease-specific plans offer comprehensive coverage. Besides hospitalization, they pay for diagnostics, outpatient treatment, and home-care; costs for which may not be covered under a regular health insurance plan. Some of these plans (for e.g. Dengue insurance plan ) only require a self-declaration of being disease-free and don’t even ask you to a get pre-insurance check-up. A disease-specific plan also charges a low premium amount, irrespective of age. 

It’s better to be safe than sorry! So, play safe this monsoon with the umbrella of health insurance. Enjoy the monsoons tension-free by insuring your loved ones and yourself against medical emergencies.

Make sure to get sufficient health insurance coverage against monsoon health risks. Compare plans and invest wisely with the help of Team Turtlemint. Call our Health Expert at 1800-266-0101 or head over to the Turtlemint website to get quotes for different health insurance plans.

Read also An anatomy of an health insurance plan

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