LoanRaja Blog- Personal Finance Guide

Health insurance premium is no more a charge you have to incur year after year. Now you can earn returns on your health insurance premium too.

Health insurance has turned the buzz word these days with many realising that it is an integral part of the portfolio. Even the employees have begun to look for independent health insurance plans thanks to the growing uncertainty at the work place. What has improved the popularity of the product is the rising medical costs and the likelihood of employer discontinuing the premium for the current year.

The good news for investor is that there has been a wider range of options. Besides the regular health insurance plans from general insurance companies which are popularly known as Mediclaim, there have been other variants from private sector. Life insurance companies which got into the action during the last couple of years have turned more aggressive by adding more features into to health insurance plans. For instance, India’s largest insurance company, LIC, has Health Plus which promises returns besides providing health cover. Now, ICICI has joined this fight by introducing market-linked features to its health insurance product. The other life insurance company, HDFC, which has been more focused on pension plans and insurance, too has joined the bandwagon and has a health insurance in its portfolio. With the growing options, it may become a necessity for investors to have more than one health plan in their portfolio. Does it make sense? Just check out if the following things are applicable to you.

Additional plan over and above provided by employer: It isn’t any more a luxury to have a separate health insurance plan for the family. Over and above the health cover provided by your employer, take another floater policy for the family. This should cover the entire family including parents. If your parents are not eligible to get cover from private or general insurance plans, sign up for Star Insurance which provides a cover of Rs 1 lakh for those above the age of 60 too.

Health cover from life companies a luxury: the insurance plans provided by life insurance companies are expensive when you compare them with general insurance plans. The premium is higher by at least 2-3 times but the advantage is that you can have them along with general health cover. Also, health companies allow you to claim the expenses with copies of bills. The biggest disadvantage with these products is that they are on individual basis. You can’t have a single plan for the entire family and hence, take a plan for the high income earning individual of the family. Since the premiums are expensive, it may make a better sense for the newer versions of the products where the premiums offer market-linked returns in the absence of claims. This will also ensure returns besides providing tax benefit. For instance, a professional in the age group of 40-45 may end up paying an annual premium of Rs 15,000-17,000 and if the premium can provide returns, the investor will be able to earn a couple of lakhs over a period of 10-15 years.

Increase health cover gradually: Insurance isn’t any more a one-time affair as needs keep changing over a period of time. With portability of insurance policies between different companies being a reality, you can take a comprehensive view of your health cover at regular intervals. However, review your health cover once in five years so that it is more realistic with the changing medical costs. Besides increasing the cover amount under existing plan, multiple products too can be considered for increasing the overall benefit.

The rising cost of medical care is becoming a big problem in urban India today. Treatment for a serious illness in a private corporate hospital can wipe out your entire life’s earnings at one go. Everybody definitely needs health insurance coverage to avert such a situation. In India awareness on health insurance is very low. Even well employed persons some times ignore the need for health insurance. A health insurance policy not only covers expenses incurred during hospitalization but also before and after hospitalization. This may include money spent for conducting medical tests and buying medicines. The cover is to the extent of the sum insured.

Health insurance is insurance that pays for all or part of a person’s health care bills. Group health plans, individual plans, workers’ compensation etc are among the health insurance plans prevalent. So long as you pay your premium regularly the insurance company will take care of your medical expenses. Cover extends to pre-hospitalisation and post-hospitalisation for periods of 30 days and 60 days respectively. Domiciliary hospitalisation is also covered. It is crucial for you to read the fine print before taking any health insurance policy. Various clauses relating to pre-existing illness and claims have to be thoroughly looked into to avoid disappointment later.

Reimbursement & cash plan

Broadly there are two types of health insurance contracts. The common one is reimbursement of medical expenses or hospitalisation charges subject to a prescribed ceiling. The second is the cash plan. This plan provides for payment of a fixed amount per day for hospitalisation. In such cases, the amount received by the insured may not be enough to meet the actual expenses always. Only the first type is a real health insurance contract. The health insurance contracts marketed by general insurance companies suffer from one serious drawback. The contracts are renewable every year and the insurer has the right to refuse renewal.

Benefits

Considering the mounting cost of doctors’ fees, medicine and hospitalization charges by taking a health insurance policy a person can safeguard himself and his family from the burden of high cost of treatment. In case of a sudden illness or accident, the health insurance policy takes care of the hospitalization, medical and other costs incurred. If you start young the premiums will be lower. It reimburses the medical expenses. Discount on insurance premium is available on family package. The premium paid up to a maximum of Rs.15,000 is exempt from income tax. A patient can be treated at home when he is not in a condition to be moved to the hospital.

Coverage

Based on the coverage offered, health insurance plans can be divided into the following categories:

Hospitalization Plans: These plans cover your expenses in case you need to be hospitalized. Within this category companies offer different payout structures and limits for various heads of expenditure. The hospitalisation coverage can be reimbursement based plans or fixed benefit plans. These plans aim to cover the more frequent medical expenses. Now health insurance companies offer many innovative policies and schemes. ‘Cashless hospitalisation’ is one such product. Under this plan, individuals insured do not have to pay for their hospital bills in case of hospitalisation; the insurance company settles the bill directly. But, certain terms and conditions have to be met. The hospital needs to have a tie-up with the insurance company.

Critical iIllness plans: These health insurance plans provide you coverage against critical illnesses such as heart attack, organ transplants, stroke, and kidney failure among others. These plans aim to cover infrequent and high cost medical expenses.

Specific conditions coverage: These plans are designed specifically to offer health insurance against certain complications due to diabetes or cancer. They may also include features such as disease management programmes, which are specific to the condition covered.

Costs of medical insurance policies vary from company to company. Insurance firms have introduced more innovative policies with riders that cost more. Here is a typical health insurance policy. Parivar mediclaim of National Insurance is a family floater health insurance policy wherein entire family will be covered under single sum insured. The eligibility is from 3 months till the age of 60. The policy covers reimbursement of hospitalization expenses for illness contracted or injury sustained by the insured person not exceeding the sum assured. The sum assured can be from Rs.2 lakh to Rs.5 lakh in multiples of 50,000.

For a Rs.2-lakh policy till the age of 35 the annual premium will be Rs.2469. An additional 25 percent will be charged for spouse and 20 percent each for two children. For 46-50 years the corresponding figures will be Rs.4290 plus 35 percent extra for spouse and 20 percent each for two children. For Varistha Mediclaim for senior citizens the ceiling of sum assured is 1 lakh. The annual premium costs Rs. 4180 for 60-65 age group. For critical illness benefit the sum assured is Rs.2 lakh. Annual premium for the same age group is Rs. 2007.