Do I Need Health Insurance and Critical Illness Insurance both?
What's inside?
Health and critical illness insurance are two distinct types of insurance policies that serve different purposes. While health insurance covers the costs of hospitalization, medical treatments, and other routine medical expenses, critical illness insurance provides a lump sum payment to the policyholder upon diagnosis of a specified critical illness.
Cost of Critical Illness Treatment in India
The cost of treatment for critical illnesses such as cancer, heart disease, stroke, and organ failure can be exorbitant in India. According to data from the Indian Council of Medical Research (ICMR), the average cost of cancer treatment in India ranges from ₹5 lakhs to ₹10 lakhs, depending on the type of cancer and the treatment required. Similarly, the cost of heart surgery can range from ₹2 lakhs to ₹5 lakhs, while the cost of a kidney transplant can be as high as ₹10 lakhs.
These staggering costs can quickly deplete an individual’s or family’s savings, leading to financial hardship. Critical illness insurance can help alleviate this burden by providing a lump sum payment that can be used to cover the costs of treatment, as well as any additional expenses such as travel, accommodation, and loss of income.
Why Is Standalone Critical Illness Insurance Policy Better?
While some health insurance policies offer critical illness coverage as an add-on or rider, standalone critical illness insurance policies are often more comprehensive and provide better coverage.
Comprehensive coverage: Standalone policies typically cover a wider range of critical illnesses, including cancer, heart disease, stroke, organ failure, and more.
Higher payout: The lump sum payout for a standalone critical illness policy is generally higher than the coverage offered by health insurance riders.
Flexibility: Standalone policies offer more flexibility in terms of coverage amount, premium payment options, and policy tenure.
Tax benefits: Premiums paid towards a standalone critical illness insurance policy are eligible for tax deductions under Section 80D of the Income Tax Act.
Critical Illness Insurance vs. Health Insurance
While both health insurance and critical illness insurance are important for ensuring financial protection during medical emergencies, they serve different purposes and have distinct advantages. Here’s a comparison between the two:
| Aspect | Health Insurance | Critical Illness Insurance |
|---|---|---|
| Purpose | Covers hospitalization, medical treatments, and routine medical expenses | Provides a lump sum payment upon diagnosis of a specified critical illness |
| Coverage | Covers a wide range of medical expenses and procedures | Covers a specific list of critical illnesses, such as cancer, heart disease, stroke, and organ failure |
| Payout | Reimbursement of medical expenses or cashless hospitalization | Lump sum payment, typically a fixed amount |
| Waiting Period | Typically shorter, ranging from a few days to a few months | Longer waiting period, typically ranging from 90 days to 1 year |
| Renewability | Renewable annually or for a specified period | Non-renewable, one-time payment |
| Tax Benefits | Premiums paid are eligible for tax deductions under Section 80D | Premiums paid are eligible for tax deductions under Section 80D |
While health insurance is essential for covering routine medical expenses and hospitalization costs, critical illness insurance can provide additional financial support to manage the costs of treatment, loss of income, and other associated expenses during a critical illness.
When Should I Buy a Critical Illness Policy?
If You Are Above The Age Band of 40 Years: As you age, the risk of developing critical illnesses such as cancer, heart disease, and stroke increases significantly. By purchasing a critical illness policy at a younger age, you can secure lower premiums and better coverage terms. Additionally, the waiting period for pre-existing conditions is typically shorter when you buy a policy at a younger age.
If You Have a Family History of Critical Illnesses: If your family has a history of critical illnesses, such as cancer, heart disease, or diabetes, you may have a higher risk of developing these conditions. In such cases, obtaining a critical illness insurance policy can provide financial protection and peace of mind.
If You Are The Breadwinner of The Family: If you are the primary earner in your family, a critical illness can not only result in significant medical expenses but also a loss of income during the treatment and recovery period. A critical illness insurance policy can help ensure that your family’s financial needs are met during this challenging time.
If You are Working In A Stressful Environment: Certain occupations or work environments can increase your risk of developing critical illnesses. For example, jobs that involve exposure to hazardous materials, high levels of stress, or sedentary lifestyles can contribute to the development of conditions like cancer, heart disease, or stroke. In such cases, a critical illness insurance policy can provide additional financial protection.
Avail Tax Benefits Along With Medical Insurance: In addition to the financial protection provided by critical illness insurance, policyholders can also enjoy tax benefits. Premiums paid towards a critical illness insurance policy are eligible for tax deductions under Section 80D of the Income Tax Act, along with premiums paid for health insurance. This can help reduce your overall tax liability and make critical illness insurance more affordable.
It’s important to note that while critical illness insurance can provide valuable financial support during a difficult time, it should not be viewed as a substitute for health insurance. Both types of insurance serve different purposes and can complement each other to ensure comprehensive medical and financial protection.
