Both life insurance and critical illness insurance are, in essence, an agreement wherein the insurer pays the insured a sum of money when the insured meets with certain conditions. The basic difference between life insurance and critical insurance relates to the person getting the money and the time of disbursal of the money.
Critical illness insurance, as the term suggests, entitles the insured to receive money from the insurer for the treatment and care of any critical illness in the eventuality of being diagnosed with such illness. Life insurance, on the other hand, is payable to the nominee or the next of kin of the insured by the insurer, when the insured person dies.
Critical Illness Insurance
Standard critical illness insurance pays the insured a lump sum amount when diagnosed with any of the diseases specified as life threatening by the insurer. The policy usually covers cancer, kidney failure, heart attack, heart bypass surgery, multiple sclerosis, stroke, and major transplant surgery.
Such policies generally remain valid for a set period or, when offered by the employer, until retirement or termination of employment. Many policies also have a exclusion period, wherein the insurer would not receive the money if the specified diseases sets in within one or two years of having availed the policy. Some polices return the premium paid, if the policy holder survives until 65 years of age without making a claim.
Critical illness cover resembles disability benefit and is of immense benefit to the insured, who would otherwise have to use their personal funds for the costly treatment such critical illness entails.
Life Insurance Cover
Life insurance cover pays out a lump sum to the dependants, next of kin, or nominee, when the insured dies. The extent of the payout and the proportion of payout of the different depends would be as per the terms of the policy. Life cover polices may take various forms, such as Whole Life, Term or Universal. The differences pertain to the payment of the premium. Payout is invariably at death.
Since this type of insurance pays out only when the person dies, it is of no material benefit to the insured personally.
