Critical Illness vs. Life Insurance: What to Choose?

Critical Illness vs. Life Insurance: What to Choose?PolicybazaarAverage Rating / 5 ( reviews)
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Life insurance is a tool that helps to safeguard one’s family members and loved ones against the strokes of uncertainty on the trail of life. On the other critical illness provides financial cushioning in the event of an illness or ailment. Both of these tools are quite similar to each other yet different.

Very often insurance seekers are stuck in dilemma and are unable to decide whether they should go for critical illness coverage or a basic life insurance plan to secure the future of their loved ones. If you are looking for an answer to this question, you are just in the right place.

In this thread we will be discussing critical illness coverage and how is it different from life insurance plans. Furthermore, we will be sharing some important tips and tricks that will help you to choose the plan that fulfills your needs and fits perfectly into your budget.

Life Insurance

As mentioned earlier, a life insurance plan is a unilateral agreement between the insurer and insured that provides financial security in the form of sum assured to the nominee of the plan in case of an event that leads to the demise or disability of the policyholder. The death benefit is provided in case of life insurance regardless of the reason for death. An exception when the life insurance claim is rejected is typically the case of suicide.

With the right life insurance plan in place, you can ensure that your loved ones do not suffer financially when you are not around to look after their needs. Moreover, it is a vital tool that helps to provide financial cushioning during the phases of financial turmoil.

A life insurance plan also helps in covering outstanding financial obligations such as mortgage student loans, car loans, etc. in case of any unfortunate event that leads to the death of the debtor. All in all, we can conclude that life insurance plans are inevitable tools meant for safeguarding and securing the future of loved ones and family members.

Critical Illness Insurance

Contrary to life insurance that provides sum assured on the demise of the policyholder regardless of the reason critical illness coverage provides only when the insured is diagnosed with an illness or ailment that leads to hospitalization.

Critical illness coverage helps to ensure that the policyholder and his/her family members are financially secure against illness and ailments. Although both of the plans provide death benefit the utility and purpose of both are quite different from each other.

Critical illness coverage is available as an add-on rider with life insurance plans to enhance the protection quotient of the basic plan. When taken together the protection is increased substantially making sure that the policyholder and his/her family members are safe against all sorts of unfortunate events that might occur during the course of life.

Differences between Life Insurance and Critical Illness

There are several differences between critical illness coverage and life insurance in the UAE, here’s a quick rundown-

Factor

Life Insurance

Critical Illness

Payment of Premiums

Designed and developed to provide a lump sum to the insured’s family in case of the untimely demise of the policyholder

Designed and developed to provide financial assistance in case of diagnosis of an ailment or life-threatening disease.

Funds

 

The nominee has complete freedom to spend the funds as per their convenience. They can allocate funds wherever they wish to.

Contrary to life insurance funds can only be used for the treatment of the policyholder or any other insured. However, it can be used for providing adaptive equipment and covering medical expenses. 

Purpose and Features

  • Typically used for replacing lost income of the insured in case of untimely demise.
  • Secondly, it used to cover outstanding financial obligations such as a mortgage, student loans, etc.
  • Third, life insurance sum assured can be used for covering post-demise expenses such as funeral and burial expenses.
  • Fourth, it can be used for leaving a legacy or inheritance to beneficiaries.
  • Critical illness coverage is typically bought to cover medical expenses in case of an ailment.
  • To replace the lost income of the unwell policyholder
  • To cover debts such as mortgage

Duration of Payment

Single time payment

Single time Payment

Basis of Payment

Payment is based on the death of the insured party

Payment is based on the diagnosis of a critical illness

Ideal Age for Purchase

Suitable for all ages

Suitable only for people below the age of 60.

Wrapping it Up

Both critical illness coverage and life insurance plans have their own importance in the lives of the insured. However, both are quite different from each other. Before going ahead and making a purchase it is vital to thoroughly research, shortlist, and compare plans based on the needs of an individual. With the right insurance and critical illness coverage, you can safeguard and protect your loved ones on the rollercoaster of life.

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