Mar 22, 2009

Mediclaim vs Critical Illness Policies - What’s the Difference?

There are various kinds of health insurance policies available in the market. The basic types are mediclaim policies (also called health insurance policies), critical illness policies, hospitalization cash benefit, unit-linked health insurance plans and senior citizens’ health plans.

A lot of people often get confused between general health plans (also called mediclaim policies) and critical illness policies. This post makes an attempt to clarify the difference between the two health insurance products:

Mediclaim vs Critical Illness Insurance Plans: A Comparison

1. Basic Feature: First, while mediclaim or health insurance policy is an indemnity policy i.e., it reimburses your actual medical expenses, critical illness policy is a defined benefit plan i.e., it gives you a lump sum on diagnosis of any of the pre-specified critical illnesses irrespective of your medical expenses. Put another way, for the purpose of critical illness policy, it is totally irrelevant whether you’re hospitalized or not and whether you incur any expenses on your medical treatment or not. The only requirement is diagnosis and not hospitalization.

2. Scope / Coverage: The second major difference between a health insurance policy and a critical illness policy is that while scope of health insurance or mediclaim policy is quite wide, critical illness policies are restricted in coverage.

Mediclaim policies usually cover the entire gamut of ailments except pre-existing diseases and certain other treatments such as maternity and pregnancy, dental treatment etc., the critical illness policies, on the other hand, cover only certain specified diseases like cancer, stroke, renal (kidney) failure, heart attack, major organ transplant, multiple sclerosis and paralysis. The exact critical ailments covered differ from insurer to insurer but are usually in the range of 6 to 12 diseases.

3. Purpose: Another key distinction between the mediclaim and critical illness policy is the purpose of buying the policy. While you need mediclaim policies to defray the hospitalization expenses incurred by you on your medical treatment, the purpose of buying critical illness policy is not only to foot the medical bills but also to compensate the financial loss or hardships that arise from your serious or critical illness.

4. Sum Assured: Whereas the maximum sum assured for mediclaim is usually capped at Rs 5 lakh (although few companies allow cover up to Rs 10 lakh) by most insurers, the critical illness policies provide you with much higher coverage ranging from Rs 5 lakh to Rs 50 lakh.

5. Waiting Period: Both the mediclaim and critical illness plans exclude pre-existing ailments. However, unlike most general health plans or mediclaim policies which carry a waiting period usually of one month (i.e., any sickness or illness contracted during first 30 days from the commencement of the policy is excluded), in case of critical illness plans most insurance companies exclude any critical ailments detected during first 90 days.

Besides, in case of mediclaim policies, there are certain ailments such as hernia, piles, sinusitis, diabetes, cataract which gets covered only after a waiting period of 2 years.

6. Other Exclusions: A few of the insurers also require a survival period of 30 days after the diagnosis of the critical illness i.e., you need to survive for 30 successive days after the diagnosis of the critical illness in order to make the claim. In other words, if you die within 30 days of the diagnosis, your claim under critical illness policy is rejected.

In case of general health insurance policies, for making a claim generally minimum stay of 24 hrs is required except in a few specified cases.

7. Policy Status after making the Claim: While critical illness policy expires, once the claim is made, mediclaim continues even after you file one or more claims; it remains in force till the total amount insured is exhausted.

Please note all the features mentioned above are general and may vary from company to company and policy to policy.

Finally, which health insurance policy – general health (mediclaim) or critical illness policy – is better? Should you go for mediclaim or buy a critical illness policy?

Actually, both policies supplement each other as they serve different purpose and therefore you require both. Imagine you’re diagnosed with a cancer. Now, while your mediclaim policy would be able to take care of your medical bills, what about loss of income if you remain on leave for long and what about post operative expenses? What if you become permanently disabled and bedridden due to paralysis? I hope you got the point.

Also see:

1. ULIPs Vs. Traditional Insurance Plans

2. Health Mediclaim Insurance - 10 Practical Tips

3. Mediclaim Health Policy - 5 Reasons to Renew on Time

4. Mediclaim Policies - Coverage & Exclusions

5. Health Insurance Plans: Section 80D Deduction

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