Critical Illness vs. Disability insurance: What are the differences?

Monthly payments while the Insured is disabled, subject to a maximum number of months, as well as to a maximum percentage of the current income.

Once the Insured recovers or has other sources of income, the benefits may stop or be reduced.

Payment is given as a lump sum once the Insured is diagnosed with a critical illness.

Payment is not connected with the person’s ability to work. He may be able to continue with his work while he is diagnosed with the covered illness.

There is a waiting period from the time the person is unable to work.

There is a waiting period from the date of diagnosis. The Insured must survive this waiting period for the claims to be payable.

It depends on the type of disability policy. There are various definitions:

• Any occupation, where the person is unable to find employment for any kind of work. If one can find other areas of employment, the claim won’t be payable. (i.e. A professional tennis player may be injured but the disability does not prevent him from performing standard work – his disability is not payable under this policy.)
• Regular occupation – total disability is defined as the inability to perform any ordinary occupation due to a medical condition.
• Own occupation – total disability is defined as the inability to perform one’s occupation.

Payment is upon diagnosis of a critical illness. Some of the illnesses are:

• Alzheimer’s disease
• Heart attack
• Major stroke
• Brain tumour
• Total blindness, deafness or muteness
• Major organ transplant
• Cancer
• HIV
• Kidney failure
• Coma
• Multiple Sclerosis
• Parkinson’s disease
• Paralysis or loss of one or more limb
• Motor Neurone Disease
• Third degree burns
• Traumatic head injury

Coverage is usually at age 65. At retirement age, retirement benefits are expected to kick in.

Cover can be until age 75 or even above. But this cover stops once a lump sum payment is made.

If premiums are paid by an employer, monthly benefits are subject to tax. If premiums are paid by the Insured, no taxes are charged.

Partial refunds given if the benefits are not paid.

All premiums paid back if there is no claim (i.e. the Insured dies before making any claim).

• Provides long term income even if you are disabled and cannot work anymore.
• Benefits are tax-free.
• Payouts continue for as long as you are disabled (until the policy reaches maximum number of months payable – you can choose from 24 months, 60 months or even a lifetime income protection cover).
• Some providers even provide a “recovery benefit” or recovery assistance.

• Provides a lump sum upon the diagnosis of a serious illness
• Some policies also define permanent disability as a critical illness.
• Benefits are tax-free.
• The claimant is free to spend the money however he sees fit.
• The lump sum can be big enough to cover treatment or pay off a mortgage.
• The amount of cover is selected not based on current income but on your choice of benefit amount.
• You can still be able to work after making a claim.
• Some policies provide partial payments for some illnesses.

• Disability benefits may stop once you are able to go back to work.
• Disability benefits will be based on your current income or a percentage of it, additional expenses related to the disability may have to be taken from your savings or from other sources.
• Depending on the waiting period selected, the income benefits may only kick in after a specified number of months.
• If you choose a “regular occupation” coverage, you may not be able to claim if you are still able to perform another job other than your current occupation.
• Income benefit may not be enough when you consider inflation. You can think about getting an inflation rider.

• Premiums can be higher as compared to disability insurance.
• You need to meet the definition of the critical illness being claimed against for critical illness claim to be payable.