What is the Difference between Critical Illness Insurance and Health Insurance?
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You may have heard more about critical illness insurance lately, but you may not have a clear idea of what it is or exactly how it works.
Many people mistakenly assume that it’s a form of health insurance. It’s true that both types of insurance can provide benefits when a covered person becomes ill or receives healthcare. But they work very differently.
The key difference is that health insurance helps pay for covered medical care and services, while critical illness insurance provides a benefit if you are diagnosed with a covered critical illness and meet the terms of your policy. Critical illness insurance is designed to complement health insurance, not replace it. Coverage, benefits and terms vary by policy and jurisdiction.
What Does Health Insurance Cover?
Most health insurance plans provide medical coverage for a wide range of medical care and services: doctor visits, hospitalizations, diagnostic tests, and prescription drugs. Many plans also cover preventive care, such as physicals and routine screenings.
Depending on the plan, providers may be paid directly, or you may be reimbursed after paying the bill.
Health insurance helps pay for covered medical services according to the terms of the plan, including applicable deductibles, copays, coinsurance and other policy limitations. Coverage may continue as you receive additional covered care, subject to the terms of your plan.
What Does Critical Illness Insurance Cover?
Critical illness insurance differs in both what it covers and how benefits are paid.
Critical illness insurance covers certain serious conditions, as specified in the policy. While covered conditions vary by policy (and where you live), they may include cancer, stroke, heart attack, and renal failure.
Critical illness insurance doesn’t cover specific medical services or bills. When you purchase a policy, you select a lump sum benefit amount. Unlike traditional health insurance, critical illness benefits are not calculated based on deductibles, copays or coinsurance for individual medical services.
If you are diagnosed with a covered condition and meet the policy requirements, the critical illness benefit is paid according to the terms of your policy.
How Can You Use Critical Illness Benefits?
With health insurance, benefits help pay for covered medical expenses you have incurred. With critical illness insurance, you can use your lump sum benefit as you choose—whether to pay medical bills not covered by your health insurance or to help with everyday household expenses. For example, if you’re unable to work because of your illness, you may choose to use the benefit for everyday expenses during that time. Critical illness insurance and disability insurance are different types of coverage, however, and their benefits and eligibility requirements differ.
Critical Illness Insurance vs. Health Insurance: Key Differences
Health Insurance | Critical Illness Insurance | |
What Does It Cover? | A wide range of covered medical services, including doctor visits & hospitalization | Specific illnesses, like cancer, heart attack and stroke, as listed in the policy |
What Triggers a Benefit? | After medical bills are incurred, either to the medical provider or covered person | After a covered critical illness is diagnosed and policy requirements are met |
Who Receives the Benefits? | Benefits may be paid directly to the medical provider or to the covered person | Benefits are paid to the covered person according to the terms of the policy |
How is the Benefit Amount Determined? | Payment equals the amount of the covered service, subject to applicable deductible, copays, coinsurance and other policy terms and limitations | Payment is based on the benefit amount selected when the policy is purchased, subject to the terms of the policy. |
How Can the Benefits Be Used? | To cover specific, incurred medical expenses | The covered person can choose to use the benefit for medical or personal expenses, subject to the terms of the policy. |
Source: Western and Southern Financial Group
How Do Critical Illness Insurance and Health Insurance Work Together?
Critical illness insurance isn’t a substitute for health insurance. Instead, it can complement health insurance by providing an additional benefit when you meet the requirements for a covered critical illness. Here are some reasons you might consider a policy:
- If you have a limited or high‑deductible health plan and want additional financial protection in the event of a covered critical illness.
- If you’re looking for additional financial protection beyond other insurance you may have, particularly if you don’t have disability coverage.
- If certain serious health conditions run in your family, you may want to consider whether critical illness coverage could provide additional financial protection if you experience a covered condition. Review the policy carefully to understand which conditions are covered, eligibility requirements, exclusions and benefit limitations.
What Should You Consider When Comparing Health Insurance and Critical Illness Insurance?
When comparing insurance coverage options, look beyond the benefit amount.
- Covered conditions: Which illnesses or events does the policy cover?
- Definitions: How does the policy define each covered condition?
- Eligibility: What requirements must be met to qualify for coverage or benefits?
- Exclusions: What conditions or circumstances aren't covered?
- Benefit limitations: What limits or other applicable terms affect the benefit?
- Availability: Is the coverage available in your jurisdiction?
If you're also evaluating health coverage, learn more about things to consider before buying individual health insurance.
Find the Right Insurance Coverage for Your Needs
At PALIG, we offer a range of individual and group health insurance plans in many countries, as well as critical illness insurance. The next step is to find out which coverage options are available in your area and whether they’re a good fit for you.
This information above is not intended to be nor should be construed as medical advice or a substitute for your doctor’s care. You should consult with an appropriate health care professional to determine what may be right for you.
This is not an offer or solicitation to sell insurance products. The information above is intended to provide general information and constitutes a summary of the different product benefits. It is not a contract or agreement. The terms of insurance coverages in the plans may vary by jurisdiction. All products are subject to exclusions and other applicable terms and conditions.