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Difference between Terminal & Critical Illness Insurance

If you are going to avail health insurance then you may also consider a term plan. A term plan is a long term insurance plan, wherein the nominee of the insurance policyholder gets the sum assured in the event of the death of the policyholder.

But the policyholders have to pay the premium or pay for a one-time payment depending on the type of insurance policy that the policyholder has purchased. In some term policies, cash payout is also provided to the policyholders for diagnosis of major illnesses such as cancer, heart attack, organ failure, etc.

These policies disburse the assured amount of insurance on the basis of the type of illness such as critical illness and terminal illness as well as terms and conditions of the policy. Most importantly before you choose your policy, it is very essential to understand the difference between critical illness and terminal illness. Once you have knowledge of a clear difference between these two types of illness, it becomes easy for you to choose the perfect type of insurance policy that suits you.

What is a Terminal Illness?

In simple words, terminal illnesses refer to incurable diseases and illnesses. Unfortunately, these illnesses have been increasing at a rapid rate, especially in urban cities thus leading to a lower life expectancy of many patients suffering from the same.

During such conditions, a terminal insurance policy becomes very beneficial, wherein the nominee receives the sum assured as well as an additional bonus after the death of the policyholder. In some cases, it is also seen that insurance providers pay up to 25% of the sum assured to policyholders if their life expectancy is assumed to be less than 12 months only.

However, in these cases, the death benefit is usually reduced to an equal amount that is already paid for the treatment of the policyholder. 

What is Critical Illness?

Critical illnesses are that type of illness which is very serious but are curable through intensive medical treatment. Some of the common critical illnesses are heart attack, cancer, stroke, disability, paralysis, blindness, organ transplant, etc. Generally, in life insurance, policyholders do get benefit upto certain extent if they suffer from any kind of disease irrespective of the genre of illness. 

But in case of health insurance, the policyholders get the financial benefit only when he is hospitalized provided the claim is valid and the insured person does not exceed the sum insured limit. But this is not the case with critical illness policy. 

In critical illness policy, the insured person gets a one-time fixed benefit and this is mainly when the treatment of the critical illness is very costly. But once you avail the one-time fixed benefit, you will not get any more benefit from the insurance provider till the policy is renewed.

Difference between Critical and Terminal illness Insurance

Terminal Illness Insurance

Critical Illness Insurance
Sum Amount Assured

Under terminal illness insurance, you can claim 25 percent of sum amount assured if the insured person needs the money for the treatment of terminal illness.

While, under critical illness insurance, you can avail a lump sum amount and a one-time benefit at the time when you need it most.
Claim Availability

With terminal illness insurance, you can secure your family members as the insurance policyholders give your nominee a huge benefit after your death.

With critical illness insurance, you can claim the benefit even if you are not hospitalized.
Financial Benefits

Terminal illness insurance policy gives a financial benefit to the policyholders only when they have a terminal illness and their life expectancy is assumed to be less than 12 months.

Critical illness insurance policy gives a financial benefit to the policyholders only when they suffer from any critical illness.

Benefits

Benefits of Terminal Illness cover?

The following are some benefits of the terminal illness cover:

  • The family members of the policyholders do not face a financial crisis after his or her death
  • In the case of a terminal illness, the policyholders can avail at least 25 percent of the sum assured for his treatment
  • The policyholders and his family can get financial support when the policyholders remain unemployed that generally follow after the diagnosis of terminal illness

Benefits of Critical Illness cover?

Following are some benefits of the critical illness cover.

  • You will get a one-time benefit when you need it most
  • You can claim the benefit not only when you are hospitalized or treatment but you can also get the benefit when you have overdue debts or you lost your income due to critical illness
  • The sum of amount assured that you get are usually tax-free

Who should opt for Terminal illness cover?

People who are suffering from a terminal illness such as cancer, heart diseases, stroke, major organ failure, coronary artery bypass disease, Alzheimer's disease, deafness, blindness, brain tumors, severe burns, paralysis, coma, etc. These are a disease that is mostly incurable and the life expectancy is generally reduced during such conditions. Hence it is better to do terminal insurance as by doing it you can secure the financial condition of your family after your death.

Who should opt for Critical illness cover?

Nowadays critical illnesses such as cancer, heart attack, stroke, disability, paralysis, blindness, organ transplant, etc. are increasing at an alarming rate. Hence, everybody should opt for critical insurance policy as it will help you to cover the financial cost of the treatment in case you develop any of such disease in the future or lose your job after the disease. 

Now after knowing the terminal illness vs. critical illness in detail, you can easily determine which will be more suitable for you and should opt as per your necessity.