Category: Health and Life Insurance

Difference between Critical Illness and Health Cover

Arvind was in a state of shock when his father got a paralytic attack, but he was shattered to know when his health insurer told him that only hospitalization charges would be paid and rest has to be bear by him. Arvind who was already going through emotional turmoil now had to look for alternate measures to bear the cost of the treatment.

Are you also under the same spell that all diseases are covered under your health plan? Think again.

Differences between Critical illness cover and health insurance cover

Many people are ignorant of the facts that critical illness and health insurance are two different policies serving different purposes. We list down the facts on how they are different

Health Insurance Cover

  1. A complete cover that includes hospitalization expenses and at times maternity benefits, OPD expenses also
  2. It is an annual contract, where the policyholder needs to pay a premium and renew policy every year
  3. The expenses could be availed with cashless or on producing valid hospitals bills.
  4. The policy could be renewed and continued even if the individual have made a claim.
  5. The insurance companies provide cover for hospital expense occurred due to accidents or various ailments.
  6. Depending on the insurer, the pre-existing ailments are covered after 1-4 years of continuous coverage with the same company.

 Critical Illness Cover

  1. The critical illness cover provides the insurer with a tax-free lump sum amount, once the insured individual is diagnosed with a critical illness as specified in the policy document.
  2. The policy is usually taken for 10-20 years.
  3. The cover [depending upon the policy] provides money against life-threatening diseases like -multiple sclerosis, cancer, kidney failure, blindness, CABG (Coronary Artery Bypass Graft surgery, )
  4. The claim could be made by the insurer once the diagnosis is confirmed. No hospitalization is required.
  5. However, once the claim is made an individual cannot renew the policy and it results in termination of the policy.
  6. The policy has a waiting period of three months, i.e. if the insured is diagnosed with the disease within these three months, the claim cannot be made. Also, the claim could not be made if within 30 days of diagnoses the insured individual expires.

 Critical illness insurance needs analysis

 Experts believe that buying critical illness insurance is not always needed and should not be targeted at face value of the agent/marketing people. Individuals need to access their situation and then make a buying decision on critical illness cover/rider. Here are some tips to help you with analysis –

  1. Family History Of critical illness – The life-threatening diseases are uncertain & non-discriminatory in nature. But, if your family has a history of any critical illness, then Critical Illness Plan is MUST
  2. Age Factor – Experts advise to buy a critical illness cover only after you cross 35 if there is no family history of critical illness and you want a guard against these life-threatening situations.

Critical illness insurance – What does it cover

  1. If you compare more of the critical illness policies, they cover 6-20 diseases maximum.
  2. If we go with the statistics, the claim settlement ratio of critical illness cover is quite low.
  3. You may not have death benefits attached to the critical illness cover, i.e. in case the person dies within 30 days of diagnoses you may not be able to claim the money.
  4. Critical Illness cover could only be claimed if both of the kidneys fail, and the claim gets rejected if one of your kidneys is functioning.
  5. Partial disabilities are also not covered as a valid claim. If an individual has lost one eye or one ear, you may not be able to make a claim under critical illness policy. Also, doctors should certify that the complete loss or both ear/eyes is irreversible i.e. it cannot be treated, and then only one could make a claim.
  6. The company may also not pay a lump sum amount, instead, may process in installments over a period. The condition happens when a person has survived in a life threatening illness.
  7. Many companies only provide the claim in a case where physical disability was caused by external factors like an accident.
  8. In some cases, if a pre-existing disease has been linked to a critical illness, then also the claims could get rejected during the waiting period.
  9. Critical illness cover comes with policy waiting period [not to be confused with Pre-existing disease waiting period] i.e. if the insured is undergoing any treatment related to critical illness the claim could be rejected.

  Before You Buy Critical Illness Cover

  1. Buy Critical illness policy as a standalone policy and do not club it as a rider to health insurance policy, as the latter is more comprehensive when compared to its rider version.
  2. Insurance companies have their definitions of each disease that are even different from medical definitions, so make sure to know the exact symptoms and condition before signing up for one.
  3. The claim received under Critical illness cover is tax-free in the hands of insured.

 We hope we have answered your queries on what’s the difference between critical illness cover and health cover. If you still have any unanswered questions or need help, feel free to contact us .

We would be glad to help you with your planning and investment related decisions.

Samiksha Seth

Content Strategist Dilzer Consultants Pvt Ltd.


7 October 2016