Medical insurance vs critical illness insurance - what is the difference? What is voluntary health insurance?

While both medical insurance and critical illness insurance provide health protection to the insured, they are fundamentally different types of insurance which have different types of purposes, compensation methods and coverage. So, what exactly is the difference between these two types of insurance? In today’s article, we will be running through the differences and help you to identify what you should pay attention to when purchasing insurance.

3 key differences between medical insurance and critical illness insurance

1. Purpose of insurance

Medical insurance supports you financially for the payment of your medical expenses. It allows you to receive reimbursement for medical expenses such as hospitalization, surgical fees, and rehabilitation during your treatment period.

You will also be able to choose the medical services that you prefer based on the compensation limit of your policy. On the other hand, critical illness insurance emphasizes being able to receive financial support should one be diagnosed with a serious illness. Once diagnosed with any of the illnesses covered under the critical illness policy, you will receive a lump-sum cash pay-out. Whether you will want to use this money to help cope with daily living expenses or use it to pay for your medical expenses, it is entirely up to you. This helps to reduce the economic pressure of not being able to work due to your illness.

2. Compensation method

Another difference between medical insurance and critical illness insurance is their compensation method. Most medical insurance uses a "pay-first claim-later" format, where the insured pays for the medical expenses first and then applies for remuneration from the insurance company based on the expenses incurred. The insurance company would then compensate you based on the coverage limit of your policy. Should your coverage limit be higher than the medical expenses incurred, you will only be compensated based on your medical bill.

In contrast, a critical illness insurance policy gives you a pay out as long as you are diagnosed with an illness under the policy. The amount received will be lump-sum compensation, which is the sum insured by the policy. With this payout, you will have more cash to help you cope with your daily expenses or any unexpected expenses when you are ill.

3. Insurance coverage

As for coverage, medical insurance covers mainly medical expenses such as hospitalisation, surgery and rehabilitation. However, such medical insurance generally does not cover mental illnesses. Critical illness insurance is generally divided into two different types of insurance, regular critical illness insurance and lifetime critical illness insurance. The policy terminates after reaching a specified compensation limit. In general, critical illness insurance covers common serious illnesses such as heart disease, cancer, and stroke. The specific number of critical illnesses covered would depend on the individual policy terms.

What is voluntary medical insurance scheme?

In recent years, we often hear about the Voluntary Health Insurance Scheme (VHIS) product, which is a type of medical insurance which falls under the category of personal hospitalization indemnity insurance products. The government aims to encourage more people to purchase this insurance by through the unique features of this voluntary medical insurance. Through this voluntary medical insurance, you can not only enjoy real-time medical coverage, receive treatment as early as possible, but also be able to apply for tax reductions and experience quicker waiting times in public hospitals. Since the voluntary medical insurance scheme was launched, it has received good responses from the public. The number of policies purchased under the government's voluntary medical insurance plan has exceeded 790,000 as of March 2021.

In addition to providing cost savings to policyholders, the launch of Hong Kong's voluntary medical insurance program helps in addressing many of the gaps in critical illness and traditional medical insurance plans in the market. For example, the voluntary medical insurance can guarantee coverage up till the age of 100, cover unknown pre-existing conditions at the time of enrolment, and cover the cost of psychiatric treatment in Hong Kong hospitals. As some medical insurance products also do not have a lifetime coverage limit, this allows you to get more comprehensive coverage. If you require medical insurance, it is worth taking some time to understand if this voluntary medical insurance is suitable for you.

Voluntary medical insurance scheme or critical illness insurance – can you only choose one?

Many people in the process of purchasing insurance may find it difficult deciding between a voluntary medical insurance scheme and critical illness insurance, as both have their benefits. However, a voluntary medical insurance scheme and critical illness insurance are not in conflict with each other and can even serve as complements. For example, a lump sum payout from one’s critical illness insurance can help in reducing financial pressure on the insured person upon being diagnosed with a critical illness. With medical costs soaring, having just a critical illness insurance alone may not be sufficient. It is likely that you will also need to purchase a voluntary medical insurance scheme to cover the high hospitalization and medical expenses in the future.

To cope with the potentially high future medical expenses related to critical illnesses, having a voluntary medical insurance scheme may be one of your choices.