Difference Between Critical Illness Insurance and Health Insurance

Critical illness and health insurance are designed to cover medical costs, but they work differently. Health insurance covers your hospital bills, regular check-ups, and treatment for general illnesses or accidents. Read more... Critical illnesses, on the other hand, give you a lump sum amount if you are diagnosed with a specific disease, such as cancer, heart attack, or kidney failure. Read less

Critical Illness Insurance vs Health Insurance

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What is Critical Illness Insurance?

Critical illness insurance is a policy that pays you a lump sum if you are diagnosed with a serious illness, as defined in your plan, such as cancer, heart attack, or stroke. Unlike a typical health insurance plan that pays doctors and hospitals for medical care, this pays you directly in a lump sum amount. You can use this amount to pay medical bills and daily living expenses or to replace lost income while you recover from a serious illness.

What is Health Insurance?

Health insurance is a contract in which you pay regular premiums to an insurance company to guarantee they will pay for your medical expenses, including visits to your doctor, hospital stays, any necessary surgeries, and medications. It protects you from high healthcare costs and helps you obtain essential health care without depleting your savings.

Difference Between Critical Illness Insurance and Health Insurance

Here is a clear differentiation explained:

Feature	Health Insurance	Critical Illness Insurance
Meaning	Covers hospitalisation and medical expenses arising from sickness, injury, or a surgical procedure.	Provides a lump-sum amount once a serious and critical illness is diagnosed, such as a stroke or heart attack.
Purpose	To avoid draining your savings to pay for hospitalisation, medical treatment, and medical bills.	To give financial assistance if you are diagnosed with a critical illness and are unable to work for an extended period while recovering.
Benefit Type	Covers reimbursement or cashless settlements for incurred medical expenses up to the policy sum insured.	A fixed lump-sum payout upon diagnosing a covered defined illness, not the cost of incurred claims.
Insurance Coverage	Preventive coverage for various forms of illness, accident, hospitalisation, day care and sometimes OPD treatment.	Coverage is limited to defined critical illnesses in the policy, including injuries to the brain, heart attacks, failure of the kidneys, paralysis or organ transplant.
Waiting Period	30 days	30 days to 90 days
Premium Amount	Premium cost depends on the sum insured, age, and medical history	Lower premium cost compared to health insurance
Sum Insured	Can range from ₹10 lac –₹1 Crore	Can range from ₹10 lac –₹1 Crore
Policy Duration	Renewed every year	This is available as a single fixed term for 5-20 years.

Disclaimer: The above comparison is for general informational purposes only and is not specific to Digit. Features such as waiting periods, sum insured, premium amounts, and policy durations may vary across insurers and individual policy terms. Please refer to your policy documents for accurate details.

Benefits of Critical Illness Insurance

Here are the advantages of critical illness insurance listed out:

Covers Major Diseases: Most policies include cover for illnesses at serious health risk, such as cancer, a heart attack, a stroke, kidney failure, or an organ transplant - all of which typically incur enormous treatment costs.
Lump sum payment: When you are diagnosed with a serious illness, you will get covered under critical illness insurance and receive a lump sum payment. This will help you get medication on time.
Income support: A long illness often means you're out of work and have a loss of income. A critical illness insurance payout will support you in tough times and cover your living costs.
Covers loans and EMIs: Serious health issues can quickly disrupt your cash flow. The payout will alleviate the pressure of making your EMI or loan payments without worry.
Low Premiums: Purchasing this cover earlier in life generally results in a lower premium, which gives you significant coverage at a much lower cost.
Tax Relief: As per the old regime, the premiums paid for critical illness insurance are eligible for a deduction under Section 80D of the Income Tax Act.

Benefits of Health Insurance

Here are some essential advantages of health insurance:

Covers Medical Expenses: Covers hospital stays, surgical procedures, doctor consultations, and prescription medications, so you have fewer out-of-pocket expenses.
Cashless Treatment: Many insurers allow for a cashless payment option for care at network hospitals, where the insurer will pay the hospital directly with no need for you to pay cash upfront.
Reduces Financial Stress: Prepares to meet unexpected, high medical expenditures without impacting your daily cash flow or savings.
Preventive Care: Many policies cover preventive medical visits, wellness checkups, and vaccinations to keep your health at the forefront.
Family Protection: Policies can include coverage for family members under a standard policy, giving financial security to your family.
Tax Advantages: Under the old tax regime, premiums paid for health insurance are eligible for deductions upto ₹ 25000 under Section 80D of the IT Act.
Additional Advantages: A few plans offer maternity, dental, or wellness coverage, depending on the plan.

Health insurance and critical illness insurance have different purposes. It's up to the individual to decide which option offers the best protection, providing the peace of mind and helping you overcome financial difficulties while addressing an unexpected serious illness.

FAQs about Critical Illness vs Health Insurance

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Is health insurance sufficient in relation to critical illnesses?

No. Health insurance relates to hospitalisation and medical bills. In contrast, critical illness insurance provides a lump sum to cover long-term costs and expenses, as well as non-medical expenses.

Should I have both health and critical illness insurance?

What is the fundamental difference between health & critical illness insurance?

Health insurance will reimburse you for your medical bills; meanwhile, critical illness insurance pays you a fixed lump-sum payment upon diagnosis with a specific serious illness that you can put towards treatment or any other significant expense.

Which illnesses are covered by critical illness insurance?

The policies will cover one or more serious illnesses listed on your plan. The typical severe conditions are cancer, heart attack, stroke, organ failure, or transplant.

Is critical illness insurance best as a standalone product?

Yes. A standalone plan provides full coverage rather than a rider with potential inadequacies.

Are there differences in premiums for critical illness versus health insurance?

Yes. Health insurance premiums will vary based on coverage, sum insured, and the number of family members covered under one policy. Critical illness premiums will vary by the number of covered illnesses and the sum insured.

Will I need to be admitted to a hospital to be eligible to claim on a critical illness policy?

No. You can claim on the policy with only a diagnosis; no hospital admission is required.

How long do health and critical illness insurance policies last?

The health insurance policy is renewed annually. Critical illness policies can last 20 years or more, depending on the premium paid.

Does critical illness insurance cover ongoing medical or hospital payments?

No. Critical illness insurance covers only serious illnesses listed in the policy, and pays a lump sum benefit for those illnesses. It does not provide coverage for other medical or hospital expenses.

What additional benefits does health insurance provide?

Health insurance often provides cashless treatment, maternity, ambulance, or pre- or post-hospitalisation benefits, wellness benefits, etc.

Is there a waiting period to claim on a critical illness insurance policy?

Yes, the waiting period for critical illness insurance policy can vary from 30 to 90 days, as per your policy terms.

Is critical illness insurance active after a claim?

No. Most critical illness insurance policies end after a claim is paid, as they just provide a lump sum payout for the covered illness.

Does critical illness insurance cover expenses other than medical expenses?

Yes, you can spend the lump sum on anything you need, like income loss, travel, home needs or anything that health insurance will not cover.

Written By

Srishti Singh

Reviewed by

Vivek Chaturvedi