Why Should You Buy Your Health Insurance and Critical Illness Policy Separately?

By Pratima Singh
  | Published: 10 November 2021

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Buying health insurance for?
  • Self/Family
  • Domestic Workers
  • Investor

People are often under the impression that health insurance is adequate for handling emergency situations. However, several life-threatening diseases or conditions may lead to excessively high medical bills which might not have been adequately covered under a health insurance plan. The confusion often exists in the mind of people that if they have already purchased a health insurance policy, there does not arise the requirement to go for a critical illness policy. However, there is a key difference between the two.

 A health insurance plan helps you get reimbursement for the hospital expenses that are incurred in the case of a medical situation. It can cover items such as ambulance transportation charges, fees for consulting the doctor, costs of medication during the hospitalization process, etc. The objective here is to offset the bills that are drawn on the hospital or the care center. The health insurance, which shall be applicable, will take care only of your medical bills. The critical illness policy is usually a significant feature in most life insurance policies. It is present in the form of a rider that is activated in the case of the occurrence of specific conditions that are covered under the list of illnesses mentioned therein. For instance, within the consolidated amount that is mentioned as the total sum insured within a life insurance policy, a certain percentage shall be reserved for the critical illness rider. In the case of its occurrence, only the percentage amount shall be paid out to the policyholder. It should be noted that insurance companies usually have their own brochures mentioning the medically accepted definitions of what constitutes a critical illness. Also, unless explicitly mentioned, hospitalization is not a necessary condition for payment of critical illness benefits, unlike in a health insurance plan.

One smart way of handling the decision of purchasing a critical illness policy could be to limit the number of diseases for which the policy is being sought. The higher the number of diseases covered under the policy, the higher will be the premium required. Thus, one should be a bit calculative and seek protection mainly for those critical illnesses for which there exists a family history. Of course, it makes sense to opt for protection for the usual diseases, such as cancer, stroke, etc., and have them covered under a critical illness policy.

Critical Differences

Mentioned below are some of the main differences in features between health insurance and a critical illness policy:

Feature Health Insurance Critical Illness Cover
Payout policy Reimburses the hospital bills in case of a medical emergency during the period of tenure. A lump sum is given as a benefit to the insured in the case of the occurrence of one of the critical illnesses.
Coverage of various diseases Health insurance is generally applicable to most diseases. Specific coverage of only those critical illnesses defined as such in the policy.
What is covered Medical expenses incurred for hospitalization and treatment purposes are reimbursed. It gives you the freedom to utilize the lump sum amount as per your requirement.
Nature of premium payment Premium increases with age. Premium remains the same throughout, subject to conditional changes by the company based on its experience of claims filed.

Why do you need to purchase both separately?

This brings us to the question of how you can make the decision of whether you should purchase only health insurance or go for both? A health insurance policy, of course, cannot be compromised. Just like one should not neglect one’s term/life insurance or car insurance, health insurance is non-negotiable. In case it is offered by one’s employer, one should subscribe to it. If not, you should arrange for it out of your own savings. However, where does the utility of having a critical illness cover arise then? Imagine a situation where the policyholder is rendered dysfunctional due to a severe medical complication all of a sudden. While death may not be the likely situation, it may create severe impairments in their day-to-day as well as financial capabilities. Usually, in the case of a critical illness such as stroke or heart attack, the patient may not be able to go to work for a year or more. It may happen that support from the employer (organization) may cease. While the organization might provide for some short-term relief, it is not wise to be dependent on a commercial organization in a situation where one suddenly needs a vast amount of financial assistance and is not even in the physical condition to arrange for it.

Keeping this picture in mind, one can imagine the utility of a health insurance policy versus a critical illness cover. As it has been already clarified, the health insurance plan will come in handy only for reimbursing the hospital bills. Other than the medical situation, any financial obligations that are unsettled will become a problem. If the patient lives in a rented house or has to pay EMIs on their vehicle or a home loan or make payments towards their children’s education, all these expenses will have to be taken care of. In addition, if the person, unfortunately, loses their employment as a result of their illness, their financial pillar, i.e. their salary will be withdrawn. This is where the critical illness rider that you have in your insurance plan can literally save your life. Of course, the hospitalization bills, surgery costs, medicine costs, etc. will constitute the main expense and the health insurance is supposed to cover them. But a critical illness policy is highly recommended on top of that as a foolproof contingency measure.

Pratima Singh
Pratima Singh

Editor | This is me saying HEY! from behind the screen you're staring into. I am a pop culture junkie who derives pleasure in writing fresh, informative, and fun content.