Comparison Between Health Insurance And Critical Illness

10 min read Posted on 11 sep 2025

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Diseases and serious ailments have become alarmingly common in today’s age. Whether it is the common case of diabetes or a serious case of cancer, Indians are largely affected by diseases. In fact, according to a report, India has about 49% of the world’s diabetic population with as high as 72 million patients. Even in case of cancer, India has the third highest number of cancer cases in women after China and USA This high incidence of ailments is a cause of concern as medical expenses are prohibitive.

Though medicine has advanced, its costs have become unaffordable. Given the medical costs and the high rate of ailments, a health insurance plan becomes a necessity. In fact, only a health plan is not sufficient. It should be supplemented with a critical illness plan as well. Many of you, however, perceive health insurance and critical illness plans to be synonymous. Well, they are not. Both these plans are quite different from one another. Let’s understand how –

Health Insurance Plans

Health insurance plans are indemnity insurance plans. They cover you for the cost of medical treatments and pay the medical bills which you incur on such treatments. The maximum claim payable under a health plan is the sum insured which you select. You can buy health plans for yourself and your family too.

Critical Illness Plans

Critical illness plans are fixed benefit health insurance plans. These plans cover a list of critical illnesses. If you are diagnosed with any of the covered illness during the term of the plan, the claim is paid. The claim is the sum insured which is paid in lump sum. It does not depend on the actual medical costs incurred. Claim received under a critical illness plan can be used for any financial requirement.

Differences between Health Insurance & Critical Illness Plans

The above briefs about health plans and critical illness plans must have given you a basic idea about how these plans are different from one another. Here is a complete set of differences between a health plan and a critical illness plan –

Points of Difference	Health Insurance Plans	Critical Illness Plans
Nature of the plan	Health plans are indemnity plans. They pay the actual costs incurred up to a maximum of the sum insured. For instance, in a health plan of Rs.5 lakhs, if the medical bills amount to Rs.2 lakhs, claim would be paid for Rs.2 lakhs	Critical illness plans are fixed benefit plans. The company pays the entire sum insured in case of a covered illness irrespective of the actual costs incurred. For instance, a critical illness plan of Rs.5 lakhs covering cancer would pay Rs.5 lakhs if you are diagnosed with cancer
Coverage offered	Health plans cover inpatient hospitalisation, pre and post hospitalisation, ambulance costs, day care treatments, organ donor treatments, etc.	Critical illness plans cover a specified set of critical illnesses only. The common illnesses which are covered include cancer, stroke, first heart attack, major organ transplants, coronary artery bypass surgery, etc.
Sum insured	Health plans have a very high sum insured levels. Coverage is available for up to Rs.5 or 6 crores	The sum insured for critical illness plans is restricted. The sum assured is ranging from Rs. 5 lacs to Rs. 1 crore.
Usage of claim amount	Health insurance claims are used to pay the medical bills you incur	Critical illness claims have no usage restriction. You can use the money to pay off your loan, for your family’s lifestyle expenses or for availing advanced treatments
Members covered	Health insurance plans can be taken to cover a single individual, the entire family and also senior citizens	Critical illness plans are taken on an individual sum insured basis only. Family floater cover is not available. Moreover, senior citizens are generally not covered under these plans
Need	A health insurance plan is a necessity. It protects against all types of medical costs	Critical illness plans can be taken to supplement your health insurance cover. They prove useful only when you suffer from a critical illness

You cannot substitute these two plans with each other. Both the plans are different and fulfil a different purpose. Make sure to invest in a health insurance plan and then supplement your cover with a critical illness plan. This would give you an ideal coverage and financial security even in the face of a critical illness.

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