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What is critical illness insurance?

Key Takeaways:

Health insurance covers eligible medical and hospitalisation expenses, while critical illness insurance provides a lump-sum payout upon diagnosis of a covered serious illness, subject to policy terms and conditions.
Having both health insurance and critical illness cover can provide broader financial protection by helping manage treatment costs, income loss, household expenses, and other recovery-related needs.

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Critical illness insurance is a type of insurance that gives a lump-sum payment if the person who has the policy is diagnosed with an illness included in the policy. These illnesses can include cancer, a heart attack, kidney failure or a stroke, depending on what the insurance company covers. Unlike health insurance, which usually pays for medical costs, critical illness insurance gives a fixed amount after a valid diagnosis and meeting the policy conditions. This money can be used for treatment bills, household expenses, loan repayments or other financial needs while recovering. The coverage, waiting period before a claim, exclusions and survival period after diagnosis, where applicable, vary for each policy.

What is health insurance?

Health insurance is a way to protect finances by helping pay for costs that arise from illness, injury or other healthcare needs. Depending on the policy, it might cover hospitalisation, operations, diagnostic tests, medicines and some costs before and after hospitalisation.

People who have health insurance can usually get treatment without paying upfront at hospitals that work with the insurance company or get money back for eligible costs, depending on how the insurer handles claims. The coverage depends on the sum insured, policy terms, exclusions, waiting periods and applicable limits. Some plans also cover treatments that do not require a hospital stay, maternity expenses or regular health check-ups.

Knowing the difference between health insurance and critical illness insurance is important because the two types of insurance serve different financial needs. Health insurance covers eligible medical costs, while critical illness insurance gives a fixed amount after a covered serious illness is diagnosed and the policy conditions are met.

Benefits of health insurance

Health insurance can help people and families deal with medical costs without having to use all their own money. Here are some of the primary benefits of a health insurance policy.

1. Covers eligible medical expenses

A health insurance plan pays for the policyholder's eligible healthcare expenses according to the sum insured and the terms and conditions of the policy.

2. Cashless treatment

A cashless facility is available under many health insurance plans. The insurance company settles eligible expenses directly with the hospital if the claim is approved, subject to the policy terms.

3. Wide range of benefits

Depending on the plan, the insurance company covers expenses for hospitalisation, surgeries, diagnostic tests, medicines and eligible pre- and post-hospitalisation expenses.

4. Coverage for the family

Eligible members of the policyholder's family can be covered under the plan. A family floater plan allows family members to share a sum insured, subject to the policy terms and limits.

5. Getting a tax break on the costs

Premiums paid for eligible health insurance plans may qualify for a tax* deduction under Section 80D of the Income-tax Act, depending on eligibility, applicable limits and the tax regime.

Benefits of critical illness health insurance

A critical illness policy gives money when the person who has the policy is diagnosed with an illness included in the policy and meets the claim conditions. The support goes beyond paying for medical bills.

1. Getting a payment after being diagnosed

The insurance company gives the set amount when the policyholder meets the conditions for a covered illness. The payment is usually based on the amount covered, not the actual treatment costs.

2. Using the money any way you want

The payment can be used for expenses related to the illness, household bills, loan repayments or other financial needs. Its use is generally not limited to hospital bills, depending on the policy terms.

3. Help when you can't work

A serious illness might stop a person from working while recovering. The payment can help with expenses when regular income decreases or stops.

4. Money help for severe illnesses

Depending on the policy, the insurance can cover illnesses such as cancer, a heart attack, a stroke or kidney failure. The illnesses covered and the severity criteria vary by insurer and policy. Exclusions and other claim conditions also apply.

5. Protection that goes with health insurance

A normal health insurance plan can pay for eligible medical costs, while critical illness insurance gives a separate set amount for a covered illness. Having both can provide additional financial support, although each claim is handled under its own policy terms.

Why do you need critical illness cover?

When an individual is diagnosed with a critical illness or needs to go through a corrective measure, as specified above, the total cost of treatment can be very high. Also, there are many non-medical costs associated with the care of the person suffering from such illnesses. Hence, it is important to have adequate coverage for such illnesses.

Health insurance vs critical illness insurance

The key difference between critical illness insurance vs health insurance are as follows:

Coverage

A normal health insurance plan offers basic coverage for a range of illnesses and diseases, and accidents, including hospitalisation costs. Some policies also offer coverage for maternity-related expenses.

A critical illness insurance policy offers coverage for a fixed number of serious diseases, sicknesses, and corrective measures. The insurance company will specify a list of diseases and corrective measures in the policy document that qualifies as a critical illness.

Benefits offered

A normal health insurance plan offers coverage for multiple family members, cashless treatments, and additional coverage options. In a critical illness insurance cover, the policyholder receives a lump sum payment of the sum assured if he/she is diagnosed with a critical illness.

Premium amount

The premium of a normal health insurance policy depends on the insurance provider, coverage provided, the number of members insured, and the sum assured of the policy. Critical illness insurance premiums depend on the insurance company, the number of diseases covered, and the sum assured.

Waiting period

For pre-existing diseases, the waiting period in a normal health insurance policy can vary between one and four years. Most insurance providers have a waiting period of 90 days for a critical insurance policy. Additionally, critical illness policies have a requirement for a survival period. The policyholder must survive a period of 14-10 days from the date of being diagnosed with a critical illness.

Claim process

Here is the claim process for a normal health insurance policy:

Cashless claim

The policyholder needs to avail of the treatment from a network hospital
Once the insurer approves the claim, then you can get the treatment done with minimal out-of-pocket expenses

Reimbursement claim

The policyholder needs to pay the hospital bills and file a claim later
The insurer will ask you to submit all the reports and bills to process the claim
On approval, the claim amount is transferred to the policyholder

Here is the claim process for a critical illness insurance policy:

If the policyholder is diagnosed with a critical illness, then he/she needs to wait for the survival period to get over before filing a claim
The insurer will require details of the diagnosis and reports and will verify it
On successful verification, the sum assured is credited to the policyholder’s account

Should you opt for normal health insurance or critical illness insurance?

Choosing the right health insurance policy depends on the requirements of the policyholder. While a normal health insurance policy offers coverage for medical treatment and hospitalisation expenses, a critical illness policy offers protection from critical diseases and sicknesses. For example, if you are the sole breadwinner of a family, then you can purchase both normal and critical illness insurance along with a family floater policy.

Also, make sure that you purchase a life insurance policy to create a financial safety net for your family. Choose a reliable life insurance company and ensure that you go through the details of life insurance to purchase a policy that offers the appropriate coverage for your family. We offer a range of Tata AIA life insurance plans that are designed to cater to the varying needs of people. Go through our offerings and choose the one that can help you to create the best financial safety net for your loved one

Conclusion

Nowadays, it is easy to purchase health insurance and life insurance plans online. Make sure that you assess your health insurance needs before choosing between a normal and critical illness insurance policy. Also, get the right life insurance plan based on your needs.

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What is the waiting period in critical illness policy?

When you opt for a critical illness policy, the insurance company pays the sum assured to the policyholder only if they are diagnosed with a critical illness after 90 days of the commencement of the policy period.

How long do critical illness claims take?

Usually, claims under critical illness insurance are settled within four to six weeks of receiving the completed claim request. However, make sure that you talk to the insurance company and understand the claims process and time taken before buying the policy.

What is the main difference between health insurance and critical illness insurance?

Health insurance pays for eligible medical costs, while critical illness insurance gives a set amount after a covered illness is diagnosed and claim conditions are met.

Can I have both health insurance and critical illness insurance?

Yes, both policies can work together by covering eligible medical costs and providing a separate set amount after a covered illness is diagnosed.

Is hospitalisation required to claim critical illness insurance?

No, it is not always necessary. A claim may depend on a covered diagnosis and other policy conditions rather than hospitalisation or treatment expenses.

Do critical illness insurance premiums qualify for tax benefits?

Premiums may qualify for a tax* deduction depending on eligibility, applicable limits and the tax regime. Check the relevant tax rules before claiming.

Which is better, critical illness insurance or health insurance?

Neither replaces the other. Health insurance covers eligible treatment costs, while critical illness insurance gives a set amount for covered serious illnesses.

Insurance cover is available under the product.
The products are underwritten by Tata AIA Life Insurance Company Ltd.
The plans are not guaranteed issuance plans, and they will be subject to Company’s underwriting and acceptance.
For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
This blog is for information and illustrative purposes only and does not purport to any financial or investment services and does not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.