Difference between critical illness insurance and standard health insurance

Securing your health is one of the most valuable gifts you can give to yourself or your family. Poor dietary habits and rising pollution levels have made avoiding health issues impossible. When a medical crisis strikes and you do not have the financial resources to deal with it, you will either spend your life savings or be unable to cover the bills and leave the condition untreated. That is where medical coverage comes in. There are various types of health insurance, but the two most prevalent are standard health coverage and critical illness coverage. Let's talk about the difference between the two.

How Does Health Insurance Work?

Assume you bought medical coverage of ₹Rs 12 lakh a few years back. The policy provides coverage for various illnesses and also pays for different procedures. However, there is a waiting period of 1 one year for general diseases, with zero waiting period for accident-related cases.

After four months of getting coverage, you fall ill due to a neurological condition. The hospitalisation cost here is around ₹Rs 10 lakh. If the neurological ailment is covered under the policy, the insurer will reimburse the amount after considering the deductible and co-pay clause.

How Does Critical Illness Cover Work?

Critical illness insurance is supplemental health insurance. It pays for expenses not covered by your regular health plan. When you are diagnosed with a qualifying critical illness, the policy pays out a lump sum. You can use this amount for various purposes, including medical costs and other financial needs.

Suppose you have critical illness insurance with a coverage limit of ₹Rs 5,00,000. Unfortunately, you are diagnosed with a heart condition. The policy will pay the entire amount. Now, if you are unable to go to work and are facing a pay cut, you can use the payout to meet household expenses as well as treat the condition.

Normal Standard Health Insurance vs Critical Illness Cover: Key Distinctions

The key differences between a standard healthcare plan and a critical illness insurance policy are:

1. Coverage

Your standard health plan will cover you for a wide range of illnesses. The policy usually covers the flu, heart diseases, thyroid disorders, etc. You will also find some plans offering maternity coverage with a waiting period ranging from one1 to three years.

On the other hand, a critical illness rider compensates for life-threatening illnesses and their corrective measures.

2. Premium Amount

Health insurance is classified into individual and family cover. The premium for regular medical insurance depends upon the number of members covered in the plan, the age of the eldest covered member, and the sum insured.

On the other hand, the premium for critical illness coverage depends on the sum assured, the insurer, and the number of chronic diseases covered.

3. Waiting Period

Standard health insurance plans come with a waiting period for general illnesses and pre-existing diseases. The former is usually 30 days, and the latter is 1-3 years.

In critical illness coverage, the waiting period for a covered disease can vary between 30 and 90 days, depending on the insurer. Also, for claim processing, the policyholder must survive 10-14 days after being diagnosed with the chronic ailment.

4. Reimbursement

In regular insurance, you cannot claim an amount over the invoice value. Also, you have to pay the amount under the deductible and co-pay clauses.

On the other hand, with critical illness cover, you will receive a lump sum amount regardless of the treatment expenses. You also have the flexibility to use the amount for any valid purpose other than settling the invoice amount.

Factors Affecting Regular Standard Health Insurance and Critical Illness Insurance Premiums

The factors that impact the premium for regular health coverage and critical illness are almost identical. Let’s see how.

1. Pre-existing Disease

This refers to any ailment you contracted before buying the insurance coverage. For example, if, at the time of making a proposal for health or critical illness coverage, the insurer finds you to be a diabetes patient, they will increase the premium.

The reason is that with diabetes, there is a high chance of you visiting the doctor often and claiming the associated expenses. Regarding critical illness coverage, diabetes, if not managed properly, can cause diabetic ketoacidosis, hyperosmolar hyperglycaemic state, and various neurological disorders. Due to the increased risk for the insurer, the premium is higher.

2. BMI (Body Mass Index)

It is a numerical measure to gauge whether your weight is within a healthy range. It gives a rough suggestion of body fat based on weight and height. If your BMI is less than 18.5, you are considered underweight. If it is over 30, you fall under the obese category. Anything in between is acceptable to insurers for fixing a budget-friendly premium for your profile.

3. Age

The older you are, the higher the likelihood of having an underlying health issue or developing one soon. The reason is that as you age, your body becomes weaker, and your immune system doesn’t respond the way it did 20 years ago. Considering this, older people have to pay higher premiums for both types of insurance.

Conclusion

Critical illness coverage is available as both a standalone plan and a rider. When deciding between regular medical coverage and a critical illness plan, purchasing a standard healthcare policy and supplementing it with the critical illness rider is best may be a good idea. This is because critical illness coverage benefits are restricted to chronic diseases mentioned explicitly in the policy document. You cannot use this plan to pay for maternity costs, diagnostic tests, and many other illnesses.