Difference between Critical Illness and Disability Insurance

The financial burden of health-related issues is often quite high, especially for chronic conditions or disabilities. For instance, someone with diabetes may also have multiple other conditions like hypertension, asthma, etc. So, automatically, it increases the total medical expenses.

Now, if you are confused about getting disability insurance or critical illness insurance, you can consider both. Getting only one might leave you unsecured for cases of the other type. To gain a better understanding, read below about the difference between disability insurance and critical illness insurance.

Disability insurance is a type of coverage plan that supports you financially if you are unable to work due to an illness or injury-driven disability. The benefits will offer you a percentage of your income for a definite period.

The main objective of this insurance is to help you get back on your feet and recover without stressing about work. However, there are certain conditions only under which you can receive disability insurance. Primarily, you have to prove your disability and that you cannot work because of the condition and reprove it as per your provider's request.

Note that the benefits will stop as your health condition improves to a point where you no longer meet the criteria or definition of a disabled person.

A critical insurance offers a lump sum coverage in case you are diagnosed with a critical disease that comes under your policy. In this case, the primary factor to get the benefits is getting diagnosed with the disease, irrespective of your working ability.

Once you receive your diagnosis report, you can claim the benefits from your insurer. Again, there is no need to prove if you are able to work or not.

Moreover, the benefit you receive from critical illness insurance is independent of your income. Instead, the amount you receive will be based on the details as per your policy document. Therefore, you must be aware of which benefits your insurer is providing.

The types of coverages you can get under disability insurance are:

• Permanent partial disability cover
• Permanent total disability cover
• Temporary partial disability cover
• Temporary total disability cover

In case you experience a total and permanent disability, your insurer will offer you the entire sum assured.

However, if the disability is temporary or partial, the benefit amount will be a percentage of the sum assured, depending on the degree or extent of the condition.

Your disability insurance plan will not cover damages against the following conditions:

• War or other allied risks.
• Taking part in speed tests of any type (using motor vehicles for bike or car race).
• Any acts of terrorism.
• Participating in any risky activities, such as paragliding, etc., is not covered by disability insurance.

The coverage under a critical illness plan may vary from insurer to insurer. However, the most common illnesses covered by insurers include the following:

• Cancer
• Heart attack
• Paralysis
• Stroke
• Coronary artery bypass surgery
• Kidney failure
• Major organ transplant
• Multiple sclerosis
• Parkinson's disease
• Alzheimer’s disease
• Terminal liver disease
• Various types of severe and permanent disabilities

Critical illness insurance policies don't cover the following:

• Diagnosed with a covered serious disease during the waiting period
• Death within 30 days after a serious disease or surgical diagnosis
• Critical disease brought on by using drugs, alcohol, cigarettes, or both
• Whether it was an external or internal congenital defect, critical sickness arose
• A serious condition associated to pregnancy or delivery
• HIV/AIDS
• Illness brought on or develops as a result of military actions, terrorism, conflict, or civil strife
• Any cosmetic surgery or dental work
• Treatment for infertility or to help with reproduction
• Replacement therapy for hormones
• Treatment took place outside of India

1. For Disability Insurance Premiums

• Age: If you opt for this plan at a younger age, the cost of premiums will tend to be lower since the risk of disability due to minor accidents is lower. On the other hand, with progressive ageing, the risk of disability increases with minor incidents, such as breaking a bone in a simple fall. Thus, you might have to pay a larger premium.
  
• Occupation: If you work in a dangerous or hazardous field, then the premium will be higher as opposed to safe office-based jobs. In addition, occupations like dentists, jewellers, and chiropractors may attract a higher premium as even slight injuries such as a broken finger might hinder their work.
• Health: A higher premium will be charged in case you have a history of disabling conditions or their potential. These may include spinal injuries like slipped discs, arthritis, asthma, heart issues, etc.
• Policy Tenure and Benefit: Premium cost is indirectly related to the period for which the insurer will offer you the benefit. For instance, the premium for a two years benefit plan will be much lower than that of a lifetime benefit plan.
• Waiting Period: The waiting period in disability insurance is the number of days you will have to be disabled for before you receive the benefits. Generally the periods vary from 30, 60, 90, and 120 days. Consequently, the higher the waiting period you choose, the lower will be your premium cost.
• Policy Provision: If you opt for a plan that pays for both total and partial disability, you will have to pay a larger premium. There are more provisions to a disability, which you must be aware of before buying a plan.

2. For Critical Illness Insurance Premiums

• Age: People of an older age have a higher risk of critical diseases than younger ones. Hence the premium for older people is also higher.
• Pre-Existing Health Issues: If you have a pre-existing health problem such as a cardiac condition, or diabetes, you might have to pay a higher premium than ones who have no predisposition to diseases.
• Body Mass Index (BMI): If you have a higher BMI, it indicates that there may be future complications like heart diseases, muscle conditions, etc. therefore, you might need frequent visits to a doctor along with a higher chance of getting diagnosed with a critical disorder. Naturally, the cost of premiums in such cases will also be higher.
• Family History: Although you can often overcome bad genes with a healthier lifestyle, insurers consider people with a family history of critical illness at a higher risk. Therefore, they will charge a higher cost on your plan.
• Lifestyle and Habits: Lifestyle choices like regular smoking or drinking factor into your premium cost as they can lead to a severe ailment in the future.
• Occupation: Just like disability insurance, your job will affect the cost of premiums. For instance, if you work in a factory that emits hazardous gases or chemicals, you are more exposed to factors causing severe lung or skin diseases. Hence, you have to pay a higher amount to get insurance.
• Policy Coverage: Lastly, the cost of premiums depends on the type of critical illness covered by your plan. For instance, if you opt for rider options, then you have to pay an additional sum along with your basic premium. Moreover, if your plan includes more illnesses, then the cost of premiums will automatically be higher.

Therefore, when you are making a purchase decision on an insurance plan, it is essential that you consider both. The difference between critical illness and disability insurance illustrated in this article sheds light on how the two can be helpful financial products for individual needs and purposes. 

For example, while disability insurance will offer you an income when you are unable to work, critical illness insurance will offer you benefits to cover the vast healthcare expenses irrespective of your employability.