While you might be tempted to think that critical illness insurance is a form of health insurance, this is not exactly the case. While critical illness is generally in place to protect your health, in case of an illness that may financially ruin you, it does not serve the same purpose that standard health insurance does. There a few factors that play into this distinction, so let’s take a look and see how these two insurance plans differ from one another.

What is the Difference Between Critical Illness Insurance and Health Insurance?

What Critical Illness Covers Opposed to Health Insurance?

While both forms of insurance protect your health, they are designed to protect your health against two different things. Standard health insurance is designed to reimburse medical expenses you might incur, while critical illness insurance is in place to cover you if the worst case scenario were to occur.

Critical illness insurance covers you from illnesses that can cause you rapid financial decline, and you’ll notice that some of these conditions are not properly covered with normal health insurance. Let’s take a look at some common critical conditions critical illness insurance covers. They are as follows:

  • Cancer
  • Full body paralysis
  • Heart attack, or impending heart attack
  • A stroke
  • Major surgeries that are high in cost like an organ transplant, or heart surgery

While health insurance might help you cover some of these costs, and might get you a better price on your prescriptions, health insurance is fairly limited when dealing with critical illnesses. Health insurance is typically in place to cover things like:

  • Medical bills from a hospital stay
  • Covering the costs of annual physicals, or only leaving you with deductibles
  • Covering the cost of prescription medication
  • Covering the costs of specific lab tests
  • Taking most of the financial burden if you end up in the emergency room
  • Certain specialist visits may also be covered, depending on your insurance company
  • Basic surgery

The Difference in the Pay Out

While you will pay a premium for both types of insurance, the way that they pay claims is much different than one another. Health insurance is designed to reimburse you for medical costs, and does not generally offer you a lump sum of cash if something bad happens to you. Health insurance will help save money on trips to the doctor, medication, certain types of hospital care, and certain types of lab testing. While this is helpful, the coverage is limited, and you don’t necessarily get a check deposited into your bank account from your health insurance provider.

Think of it as a pay as you go type of insurance payout.

Plus, with health insurance, you have no options in regard to the way the insurance money is spent. It has to go directly to medical bills.

The reason critical illness insurance is different, is due to the fact that it is more closely related to a life insurance payout. This means that if you fall victim to a catastrophic condition, critical illness insurance will pay out a lump sum of tax free money. This money can be used for things other than just medical expenses as well, and can even be used to protect a mortgage or put your kids through college. So when it comes to this type of payout, it is a bit more direct. You get options.

So, if you get diagnosed with a critical condition, the company will determine whether or not it is covered. If your condition is, they will issue a lump sum payout to you or your beneficiary God forbid something happens to you in the process.

The Verdict

Health insurance and critical illness insurance are two separate entities. While they may seem similar at first glance, the issues that they cover are totally different. These two plans are best used when working together with each other to ensure you have no gaps in your coverage. Make sure you understand what each policy is used for before you make any final decisions regarding your coverage.

Further reading: What is the Difference Between Critical Illness Insurance and Cancer Insurance?