Medical VS Critical Illness Insurance
What is Medical Insurance? And What is VHIS?
Medical insurance aims to support the insured person’s daily medical expenses. The coverage could be divided into outpatient and inpatient.
Outpatient coverage includes general practitioner and specialist visit fees, prescription drugs, and other related expenses.
Inpatient coverage covers the costs that may arise during hospitalization, such as Surgeon’s fee, room and board, Attending doctor’s visit fee, etc., so that insured persons do not have to give up treatment due to financial pressure and can seek appropriate treatment as soon as possible.
The Voluntary Health Insurance Scheme (VHIS) has become increasingly popular among policyholders in Hong Kong. It is a medical insurance that focuses on protecting inpatient treatment which conforms to the Health Bureau-designed framework.
The scope of coverage includes –
- unknown pre-existing conditions at the time of application
- congenital diseases that appear after the age of 8
- Positron Emission Tomography (PET Scan), and
- Psychiatric treatments, etc.
In addition, VHIS could be divided into two types – (1) standard and (2) flexi plans.
- The standard VHIS plan provides the minimum coverage required by the government, including a benefit limit of HK$750/ day for Room and board (up to a maximum of 180 days per year), and HK$14,000 of miscellaneous/ policy year. All Standard VHIS on the market are quite similar.
- The Flexi VHIS plan provides a higher benefits limit and additional benefits such as Accident and Emergency Outpatient Treatments. As insurance companies can freely add benefit items, Flexi VHIS plans provided by various companies could be very different.
What is Critical Illness Insurance?
Generally speaking, Critical Illness Insurance focuses on protecting designated severe illnesses specified in the policy, including cancer, stroke, heart disease, etc. The coverage usually falls into the 5 categories below (the area of coverage may vary between different policies, some only protect the first 3 types of diseases:
- Cancer
- Heart-related diseases
- Neurological diseases, such as Stroke
- Major organ related diseases, such as Kidney Failure
- Other serious illnesses
Once the insured person is diagnosed with a critical illness protected by the policy, a lump sum payment will be made. The insured person has the right to decide how to use the payment, either to use in daily life, medical treatment, caregivers hiring or supplement purchase .
The coverage allows the insured person to maintain a good quality of life even if they have to stop working due to illness and lose the income, they could focus on recovery without financial worries.
Difference between Medical VS Critical Illness Insurance
With the above explanation, you may already have a basic understanding of medical insurance and critical illness insurance. So what are the differences between the two?
The table below outlines the differences between them:
| Critical Illness Insurance | Medical Insurance | |
| Scope of coverage | designated critical illnesses | outpatient and inpatient treatment |
| Purchase for the insurance | compensate for lost income due to illness | pay for medical expenses |
| Frequency of use | Usually one-time | Multiple times |
| Features |
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Learn more about Bowtie VHIS & Critical Illness
It’s worth noting that the coverage of different insurance companies may vary. To give a more concrete demonstration of the differences between the two, the following table uses Bowtie VHIS and Bowtie Term Critical Illness – Multiple Cover as examples:
| Bowtie VHIS Flexi Regular | Bowtie Term Critical Illness – Multiple Cover | |
| Sum Insured per month with a premium of ~HK$200* | HK$600,000 / year | HK$1.7 million |
| compensate for lost income due to illness | pay for medical expenses | |
| Covered Diseases | Any injuries or illnesses requiring hospitalization |
|
| Scope of coverage | Covered benefit items in the policy | Any illness that meets the definition of critical illness on the policy |
- *Using 30 year-old, non-smoker male as example: his standard monthly premium for VHIS Flexi Regular would be $218; and for Term Critical Illness - Multiple Cover would be $201
- ^Cancer, Heart Diseases, and Stroke
Medical VS Critical Illness Insurance - Reimbursement Methods
In terms of claims, there are fundamental differences between medical insurance and critical illness insurance.
The following table uses Bowtie VHIS and Bowtie Term Critical Illness – Multiple Cover as examples:
| Bowtie VHIS | Bowtie Term Critical Illness – Multiple Cover | |
| Reimbursement Methods | Based on actual medical expenses | Up to 5 lump-sum payments |
| Reimbursement Amount | Based on the actual fee of medical items or procedures For example, if the daily room rate for hospitalization is HK$1,000, Bowtie VHIS Flexi Regular will reimburse HK$1,000 to the Insured. | From HK$100,000 to HK$4 million (depending on the sum insured) |
The claim principle for medical insurance is based on actual expenses and will be reimbursed according to the benefit items and limits specified in the VHIS policy.
For example, even if the “Benefit amount per policy year” is HK$200,000, if the “Surgeon’s fee” is HK$40,000, and the “benefit limit” for this item is HK$30,000, the insured person will only receive a maximum reimbursement of HK$30,000 for the “Surgeon’s fee”.
On the other hand, reimbursement for critical illness insurance is a lump sum payment. As long as the insured person is diagnosed with a designated critical illness, the insurance company will pay a lump sum amount, and there are no restrictions on how the reimbursement is used.
Medical Insurance vs Critical Illness: Product Design
In addition to the differences in coverage and claims, there are also some differences in product design between the two.
1. Savings Component
On the market, only a few medical insurance products are with a savings component while all VHIS are pure protection medical insurance policies.
On the other hand, there are two types of critical illness insurance on the market, including the savings & investment, and pure protection policy. The former has a savings effect, while the latter does not. Each has its own characteristics, with the premiums for a pure protection policy being as low as one-sixth or even one-tenth of that for a savings policy, but it will not accumulate cash value over time.
The insured age varies among different insurance companies and specific plans. Taking Bowtie as an example:
| Bowtie VHIS Standard Plan | Bowtie VHIS Flexi Plan | Bowtie Term Critical Illness – Multiple Cover | |
| Issue Age | 15 days to 80 years old | 15 days to 65 years old | |
| Period of Cover | Guaranteed annual renewal up to age 100 | Lifetime guaranteed annual renewal | Guaranteed annual renewal up to age 100* |
All VHIS Standard Plans offer guaranteed annual renewal up to age 100, while the Issue Age & Period of Cover of the Flexi Plan are determined by different companies. In Bowtie , VHIS Flexi plans guarantee lifetime coverage.
As for critical illness insurance, there is no mandatory age requirement (it varies between products of different insurance companies). However, most savings & investment policies provide a coverage period of up to age 100 or lifetime, while some pure protection critical illness policies only cover up to age 75. Before purchasing, it is important to check the period of cover.
* With the policyholder’s confirmation, Bowtie will switch “Bowtie Term Critical Illness Multiple Cover” and “Bowtie Term Critical Illness Early Stage and Multiple Cover” to “Bowtie Term Critical Illness” when Insured Person reaches 86-year-old at the policy renewal, and arrange automatic renewal from age 86 to 100. It means : early-stage illness coverage & multiple cover will end on the plan anniversary immediately following age 85. Policy will be terminated when the major critical illness benefit has been paid. For protection details, please refer to Bowtie Term Critical Illness’s Terms and Conditions and Key Risks and Policy Exclusions. If the insured person suffers from a critical illness at a very old age, the total critical illness premiums paid may exceed the sum insured.
One advantage of VHIS is that the premiums are tax-deductible, with a maximum qualifying premiums for tax deduction of HK$8,000 per insured person.
The insured person can be the taxpayer, their spouse and children, grandparents, great-grandparents, parents, and siblings. It means if you purchase insurance for the whole family, you may save more tax.
Other medical insurance and critical illness insurance products on the market are not tax deductible.
Medical Insurance vs Critical Illness: Which is Better for You?
Many people misunderstand that they only need to choose between medical insurance and critical illness insurance to meet all their protection needs. In fact, the product designs of these two types of insurance are different and can help in different situations. Therefore, if financial conditions permit, it is best to purchase both to create a more solid protection net.
However, If your budget is limited, consider the following key points:
1. What kind of coverage do you want?
The purposes of medical insurance and critical illness insurance are very different. The former aims to reimburse actual medical expenses, while the latter provides a lump-sum compensation when you lose the ability to work and solves cash flow problems.
As the coverage and compensation methods of the two types of insurance are quite different, you should first weigh your personal needs and then choose the most suitable insurance plan.
2. Is your group medical insurance coverage sufficient?
Many companies provide employees with group medical insurance, which provides basic medical coverage for hospitalization, outpatient, dental visits, etc. Therefore, if you are already protected by group medical insurance, you can prioritize purchasing critical illness insurance.
If finance allows, you can also purchase a medical insurance plan with a larger coverage amount, such as Bowtie Pink VHIS (Semi-Private/Private) to enjoy more comprehensive medical coverage.
3. How old are you?
Objectively speaking, the chance of getting critical illnesses is relatively lower than other general diseases. If you are younger, the chance of getting critical illness should be even lower. Moreover, early treatment of general illnesses can avoid them developing into critical illnesses. In other words, if you are still young and have a limited budget, you should buy medical insurance first.
Finally, regardless of which medical insurance you decide to purchase, remember to choose the most suitable benefit limit based on your actual needs.
