Health insurance vs critical illness insurance: Which one should you choose?

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With the rise of critical illnesses in India, specific health insurance plans covering such illnesses are gaining traction. According to the NCRP Report 2020 (National Cancer Registry Programme) released by ICMR and National Centre for Disease Informatics and Research, Bengaluru, suggested that total number of new cancer cases in India is estimated to rise from 13.9 lakhs in 2020 to 15.7 lakhs by the end of 2025.

With such critical illnesses on the rise, many individuals are investing in comprehensive critical illness insurance plans. But are these plans a substitute for health insurance?

Critical illness plans – the meaning

Critical illness insurance is a type of health insurance plan. The plan covers a list of critical illnesses and treatments, the common ones being cancer, stroke, multiple sclerosis, major organ transplant, open chest CABG, heart attack, etc.

If you are diagnosed with any of the covered illnesses or undergo a covered treatment, the sum insured is paid in a lump sum. You can use the sum insured to pay for advance medical treatments or to fulfil any other financial obligation that you might have.

Critical illness plans, therefore, provide a lump sum financial assistance in the face of major illnesses and prove to be valuable coverage.

When you compare critical illness plans to health insurance plans, a common question rages for many policyholders – health insurance or critical illness insurance. They don’t seem to figure out which policy to buy.

Do health insurance plans cover critical illnesses?

A health insurance policy is a comprehensive insurance policy that covers a range of medical costs incurred in a medical emergency. It covers –

— Hospital bills — Pre and post-hospitalisation expenses — Ambulance charges — Daycare treatments —Organ donor treatments — Domiciliary treatments, etc.

Coverage is allowed on an indemnity basis, i.e. the costs that you incur are paid by the policy. The policy covers every type of illness, injury or disease (unless specifically excluded) and gives you an exhaustive scope of protection. Given the rising medical costs as well as the rising incidence of ailments, a health insurance policy becomes a must buy. So, yes, even health insurance plans cover the hospitalisation expenses for critical illnesses but nothing beyond.

Critical illness vis-à-vis health insurance

When it comes to a comparison match between these two plans, health insurance takes the most obvious lead. The primary reason is the scope of coverage.

Critical illness plans are very narrow in their scope of coverage. They come to your aid only if you suffer from a critical condition covered under the policy. For other medical emergencies, not falling under the covered conditions, no coverage is available. This is where health insurance plans take the cake.

A comprehensive indemnity health plan would cover all types of illnesses and injuries, even critical illnesses. If you suffer from a critical illness, the health plan would cover the treatment costs. Moreover, even if you don’t suffer from a critical illness but are hospitalised for any other illness or injury, the policy would cover your hospital bills, a coverage that is absent from critical illness plans.

However, critical illness plans are a fixed benefit plans and can be taken along with your indemnity health insurance plans. They come in tremendously handy if there is a critical illness, as there could be additional expenses such as physiotherapy, nurse at home, loss of income, etc. which would not be covered under any regular health plan. Thus, the hospitalisation expenses can be taken care of with your indemnity plan while the additional expenses can be managed with the lump sum payout of the critical illness plan which pays the entire sum insured on survival of only 30 days after diagnosis.

However, since the probability of critical illnesses is lower than the probability of suffering from other medical contingencies, health insurance plans are a must.

What should you do?

Insure yourself under a comprehensive health insurance plan with an optimal sum insured level. Once you have health insurance cover and want additional protection against critical illnesses, you can opt for a critical illness insurance policy too. Critical illness plans can be a supplement to health insurance plans, not their substitute. So, insure yourself, first, under a comprehensive health plan with an optimal sum insured and then opt for a critical illness plan for a wider scope of coverage.

(The writer is co-founder, Turtlemint. Views expressed are personal)