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Difference Between Terminal Illness and Critical Illness Insurance Explained

In recent years, India has witnessed a significant rise in serious illnesses. Notably, the cancer-related hospitalisation claims increased by 12% in 2024, closely followed by cardiac arrest. This surge has increased public anxiety and concerns about the financial burden of such diagnoses.

With these rising concerns, it's crucial for everyone to have a critical or terminal illness cover to protect themselves during a medical emergency. But before purchasing one, it is important for you to know the difference between critical and terminal illnesses.

Read this article to understand the distinctions between the two illnesses. This will help you decide on the best coverage that suits your needs.

What is Terminal Illness?
What is Critical Illness?
Critical Illness vs Terminal Illness Insurance
Benefits of Terminal and Critical Illness Insurance
Do I Need Both Insurance?
Are Critical & Terminal Illness Insurance the Same?
Which is Better?
Frequenlty Asked Questions

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.

Advanced stages of cancer, last-stage organ failure, Alzheimer's disease, neurological disorders, etc., are typical examples of terminal illness.

What is Critical Illness?

Critical illnesses are very serious illnesses that are curable through intensive medical treatment. Some of the common critical illnesses are heart attack, cancer, stroke, disability, paralysis, blindness, organ transplant, etc.

In the 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. However, this is not the case with critical illness insurance.

Critical illness coverage in health insurance provides the insured person with a one-time fixed benefit because critical illness treatment is very costly. But once you avail of the one-time fixed benefit, you will not get any more benefits from the insurance provider till the policy is renewed.

Difference Between Critical Illness and Terminal Illness Insurance

While both critical and terminal illnesses involve severe health conditions, they differ significantly in terms of sum assured, claim availability, etc. Understanding these differences is essential for making informed decisions about health insurance and ensuring the right coverage for your needs.

Here are some key differences between critical and terminal illness insurance:

Factor	Terminal Illness Insurance	Critical Illness Insurance
Sum Amount Assured	Under terminal illness insurance, you can claim 25%* of the sum amount assured if the insured person needs the money for the treatment of a terminal illness.	Under critical illness insurance, you can avail yourself of 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 policies provide financial benefits to policyholders only when they suffer from a critical illness and survive 30 days* after the diagnosis.
Coverage	Includes coverage for terminal conditions such as severe burns, Alzheimer's disease, brain tumours, paralysis, and organ failure.	Covers serious conditions such as kidney failure, cancer, heart attacks, strokes, organ transplants, etc.
Who Should Buy It?	It is beneficial for those who want to ensure their loved ones are financially supported in the event of an individual death due to any illness.	Individuals who want financial protection against the costs associated with serious illnesses that can be cured but may not have sufficient savings to cover such expenses should consider Critical illness insurance.

*Note: This information is added only for informative purposes and collected from different sources across the Internet. The life expectancy month, days, and amount you can claim are not Digit specific and can vary from policy to policy.

Benefits of Terminal and Critical Illness Insurance

Life is unpredictable, and serious health conditions can disrupt not just your well-being but also your finances. That’s where terminal and critical illness insurance becomes invaluable. Together, these covers act as a safety net, safeguarding you and your loved ones from the financial impact of health crises.

Let’s learn about the benefits of both insurances:

Benefits of Terminal Illness Insurance

The following are some benefits of terminal illness insurance:

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% of the sum assured for their treatment
The policyholder and his family can get financial support when the policyholder remains unemployed, generally following after the diagnosis of a terminal illness
The payout can help in the dependents' settlement and future financial security

Benefits of Critical Illness Insurance

The following are some benefits of critical illness coverage:

You will get a one-time benefit when you need it most
You can claim the benefit not only when you are hospitalized or treated but you can also get the benefit when you have overdue debts or you lost your income due to critical illness
The sum of the amount assured that you get is usually tax-free
The remaining sum assured can be used as a replacement income to pay off debts, loans, and liabilities

Do I Need Both Terminal Illness and Critical Illness Insurance?

Your financial situation will determine the answer to this excellent question. Nobody anticipates receiving a major disease or injury diagnosis; it frequently happens unexpectedly and severely disrupts daily living. Here is why you need a Critical Illness and Terminal Illness Coverage.

Reasons to Buy Terminal Illness Insurance

Terminal illness insurance is a crucial component of life insurance, offering a financial safety net when time is limited. This coverage ensures that you or your family can manage finances, healthcare costs and personal matters during a challenging time. The money from the terminal illness insurance can be used for:

Cover medical bills, hospice care, and funeral costs.
Eases financial strain during end days.
Helps settle debts like mortgages and loans.
Provides peace of mind for family.

Reasons to Buy Critical Illness Insurance

A lump sum payment from critical illness insurance can significantly reduce financial strain at a trying period in your life if you cannot work due to your unavoidable living expenses and liabilities. The money can be used for anything; however, here are some examples of possible uses:

Rent or mortgage payments
Resolving debts or loans
Living expenses and bills
Covering the cost of caretakers
Covering medical expenses

Are Critical Illness and Terminal Illness Insurance the Same?

No, they are not the same thing. Although the diseases and injuries they cover are frequently quite similar, critical illness insurance pays out for specific serious conditions you will likely have throughout your life, while terminal illness coverage is part of life insurance and pays out if your condition is incurable and likely to cause death within a year.

Terminal Illness vs Critical Illness Insurance: Which is Better?

Choosing between critical illness vs terminal illness depends on your personal circumstances, financial goals, and health needs.

However, for comprehensive protection, consider combining both. Opt for critical illness insurance as a standalone policy or rider and ensure your life insurance includes terminal illness benefits. This ensures you are financially prepared for both unexpected health challenges and end-of-life scenarios.

Here are some factors which will help you decide what to choose:

In conclusion, understanding the differences between critical illness and terminal illness insurance is essential for making informed insurance decisions. While critical illness insurance provides a financial safety net for treating severe but potentially curable conditions, terminal illness insurance focuses on offering support during the most challenging and irreversible stages of life.

By evaluating your health risks, lifestyle, and financial goals, you can choose the right plan to ensure peace of mind and financial security.

FAQs about Terminal Illness vs Critical Illness Insurance

All

What is Critical Illness Cover?

Critical Illness Cover in health insurance provides a lump sum payment if you are diagnosed with a specified serious illness or medical condition, such as cancer, heart attack, stroke, or organ transplant.

What is Terminal Illness Cover?

Terminal Illness Cover is typically included with life insurance policies and provides a payout if you are diagnosed with a terminal illness, meaning your condition is expected to lead to death within 12 months.

How do Critical Illness and Terminal Illness Covers differ in terms of coverage?

Critical Illness Cover pays out for specific serious conditions that you will live with, while Terminal Illness Cover pays out if your condition is incurable and expected to result in death within a year.

Can Critical Illness Insurance be purchased separately?

Yes, some insurance companies provide critical illness coverage as a standalone policy, while others provide it as an Add-on. Check with your policyholder to confirm before buying any cover.

Is Terminal Illness Insurance usually included in life insurance policies?

Yes, Terminal Illness Insurance is generally included as a standard feature in most life insurance policies.

What types of illnesses are covered under Critical Illness Cover?

Common illnesses covered include cancer, heart attack, stroke, multiple sclerosis, and major organ transplants.

What types of illnesses are covered under Terminal Illness Cover?

Terminal Illness Cover typically includes conditions like advanced cancer, severe heart disease, and other incurable illnesses expected to result in death within 12 months.

Do I require coverage for terminal and critical illnesses?

Yes, you must have coverage for terminal and critical illnesses. This is because of factors such as work environment, lifestyle, family medical history, financial situation, and future financial obligations. If there is little chance of getting both diseases, buying them both can be a good way to protect yourself financially.

Is diabetes a terminal illness condition?

No, diabetes is not a fatal condition. Terminal illnesses or diseases are defined as those that cannot be cured. A person with diabetes can live a normal life provided they receive the right medical care and treatment.

Does receiving Critical Illness Insurance coverage require that I be admitted to the hospital?

No. You do not need to be admitted to the hospital to benefit from Critical Illness coverage. You can submit a claim with the necessary paperwork if you have been diagnosed with a serious illness. A one-time lump sum payment equal to the amounts guaranteed will be made by the insurer to you in order to resolve the claim.

Is cancer a terminal illness or a critical illness?

Cancer can be classified as both a critical illness and a terminal illness, depending on its stage and prognosis. In the early stages, many cancers are considered critical illnesses because they can be treated and potentially cured with medical intervention. However, if cancer progresses to an advanced stage where it is no longer curable and is expected to lead to death within a short period, it is then classified as a terminal illness.

What is the difference between a terminal illness and a chronic illness?

A terminal illness is a condition that is expected to lead to death within a relatively short period, typically within 12 months. Terminal illnesses are usually incurable and progressive, meaning they worsen over time despite treatment. Examples include advanced cancer, severe heart disease, and organ failure.

A chronic illness, on the other hand, is a long-term condition that can be managed but not cured. People with chronic illnesses can live for many years with proper treatment and lifestyle adjustments. Examples of chronic illnesses include diabetes, asthma, and rheumatoid arthritis.

Is stroke known as a terminal illness?

A stroke itself is not typically classified as a terminal illness, but it can lead to terminal conditions. The severity of a stroke can vary widely. Some individuals recover fully, while others may experience significant disabilities. In severe cases, a stroke can cause extensive brain damage, leading to life-threatening complications or a terminal prognosis if the individual is not expected to survive.

Is paralysis considered a terminal illness?

Paralysis is not generally considered a terminal illness. It is a condition resulting from the loss of muscle function in part of the body, often due to damage to the nervous system, such as from a stroke, spinal cord injury, or neurological disease. While paralysis can significantly impact a person's quality of life, it is not inherently life-threatening.

Can the payout from Critical Illness Cover be used for any purpose?

Yes, the lump sum payment can be used for any purpose, such as medical treatment, paying off debts, or adapting your home.

Who should consider buying Critical Illness Cover?

Individuals who want financial protection against the costs associated with serious illnesses and who may not have sufficient savings to cover such expenses should consider Critical Illness Coverage.

Who should consider having Terminal Illness Cover?

Terminal Illness Coverage is beneficial for those who want to ensure their loved ones are financially supported in the event of a terminal diagnosis.