Critical Illness Insurance vs. Health Insurance Policy

So, you purchased health insurance to compensate for your medical expenses. Here’s what you should know: regular health plans can’t promise you a round sum if you’re diagnosed with life-threatening ailments—critical illness insurance does.

While a health insurance plan can protect individuals in the event of a medical emergency, it may not cover all the costs needed for treating serious illnesses. It only covers expenses related to hospitalisation, prescribed medicine, doctor consultation fees, surgical costs, and even dental expenses.

Read on to understand more the difference between health insurance and critical illness policy.

More about Health Insurance Plan 

As with other insurance types, health insurance involves two parties—the insurer and the policyholder. The policyholder (the insured) pays a premium to the insurance company in return for a promise to settle their medical bills. 

There are two types of health insurance claim settlement: cashless and reimbursement. If the policyholder opts for cashless services, the insurance company directly settles your medical bills with the hospital.

In a reimbursement claim, the policyholder bears the medical costs first and then ask for reimbursement once discharged from the hospital and submitted the necessary bills. 

Types

Public health insurance plan – provided through a government program. In Singapore, health coverage is achieved through a mixed financing system. The country’s public statutory insurance system, MediShield Life, covers hospital bills and outpatient treatments.

Private health insurance plan – a health insurance coverage offered by a private entity and not funded by the government. Most private health insurance policies are managed care plans, which means the insurance companies work with different medical providers. The common types of managed care plans include:

• HMO or health maintenance organisation
• PPO or preferred provider organisation
• EPO or exclusive provider plans
• POS or point-of-service plans

Coverage

Both health insurance policy and critical illness insurance have specific coverage. The former covers services that can help in maintaining health and treating illness or accidents, including:

• doctors’ services
• ambulance expenses
• prescription drug coverage
• pre- and post-hospitalisation charges
• inpatient and outpatient hospital care

Other plans include coverage on the following:

• dental expenses
• maternity and newborn care 
• free preventive care (i.e., vaccines, screenings, etc.)

Benefits

Health insurance has many benefits. Among the most common advantages of having this insurance are:

Secure finances. Health problems occur unexpectedly and could cost a great deal of money. When these uncertainties happen, you can secure your finances and avoid suffering from deep debt or even fall into bankruptcy. 

Peace of mind. Although health insurance doesn’t cover the medical costs in full, the fact that it covers a part of the expenses can lessen your stress.

Improved health. Since health insurance covers regular check-ups and hospital visits, you can be treated before your health condition gets worse.

Waiting Period

Health insurance coverage doesn’t take effect immediately right after the purchase. Most health insurance policies come with a waiting period between 30 days and 90 days upon the approval of cover. 

More about Critical Illness Insurance

As the name suggests, a critical illness (CI) policy pays out a lump sum in the event of an unfortunate critical illness diagnosis. The money is sent directly to the insured, not to a healthcare provider, to cover the crippling financial costs related to the illness.

In a nutshell, the insured gets the cash benefit equal to the plan’s face amount. The insured can use the amount to pay out-of-pocket medical costs, medicines, and other non-medical expenses, including transportation, childcare, and more.

Types

The CI plan is offered in two options—a standalone plan or a rider to a life insurance policy. Here’s a quick comparison between the two:

Standalone or separate plan	Rider or add-on to a life policy
provides a comprehensive coveragea medical test is requiredthe policyholder/ insured will receive the lump sum payout upon diagnosis	coverage depends on the base policyno medical test is required the policyholder/insured is only allowed to claim at late-stage

Coverage

Critical illness insurance covers a specified list of life-threatening diseases. The number of which might vary depending on the insurer and policy types. 

Among the illnesses covered in a CI plan are cancer, kidney failure, bypass surgery, heart attack of specified severity, and stroke with permanent neurological deficit.

Check out the complete list of 37 Cis, as defined by The Life Insurance Association (LIA) of Singapore here.

Benefits

Is a critical illness plan worth it? The answer is YES. Critical ailments come without warning. And when they happen, they can affect the person not only physically but also emotionally and financially. 

Whether it’s a standalone critical illness policy or critical illness coverage, the insured can weather a health crisis without draining his/her savings. The insurance will cover the costly treatment and hospital bills, thus alleviating financial worries.

Waiting Period

Most critical illness policies have a specified waiting period before the coverage begins. Typically, insurance companies require policyholders to wait for at least 30-90 days from the date of purchase before they file a claim. 

The Life Insurance Association (LIA) of Singapore oblige insurers to adopt a 90-day waiting period for the severe stage of illnesses, including:

• major cancer
• coronary artery bypass surgery
• heart attack of specified severity
• angioplasty and other invasive treatment for coronary artery
• other severe coronary artery diseases

The Bottom Line

Relying on health insurance isn’t enough, especially when critical illness strikes. Unlike health plans, critical illness insurance policies cover the cost of curing and managing life-threatening diseases.

In short, the critical illness coverage helps individuals be prepared for costly hospital bills and medications and allows them to focus on what matters more—recovery.