BY TEENA JAIN KAUSHAL AND SUNIL DHAWAN

Getting health insurance has become imperative. Choose a health plan that best suits your needs.

INSURANCE, BY definition, is morbid. What if I die suddenly? What if I had to undergo expensive medical treatment? Insurers, who work with large samples, calculate the probability of such an event and, hence, the possibility of them having to pay out a sum of money to mitigate, to the extent possible, the effects of that disaster. Given that costs at private healthcare facilities, where you are most likely to land up, is high, and, doubling every four years ten months or so, the rest of your money life could easily go out of whack if you had to incur such expenses.

Just 12 percent of India’s population is covered with some sort of health insurance. Pared to the bone, for a comparatively small price, health insurance provides you the money you need, and you do not have to undergo expensive medical treatment of some varieties, mainly involving hospitalisation. The basic type is an indemnity cover, i.e., the insurer only reimburses costs. As cost is the primary point of pain, there’s sense in buying it.

ON OFFER

ONCE you have decided to buy health insurance, the next step is to try to figure out what you want to buy, and from whom. Let’s take a look at the kinds of health insurance covers on offer.

Individual Health Plan (IHP). These are the so-called ‘tradi­tional’ health insurance covers, commonly known as ‘mediclaim’ policies. They mainly cover hospitalisation expenses provided it is for at least 24 hours. The expenses for hospital bed, nursing, surgeon’s fees, consultant doctor’s fees, cost of blood, oxygen and operation theatre charges are the usual inclusions. However, unlike the past, most plans now come with sub-limits for each of these heads. They usually do not cover pre-existing diseases or complications arising from them for the first four years of the policy. Besides, claims for specific ailments may not be allowed in the first or second year. For every claim-free year, most plans add five percent to the sum insured.

Family floaters (FF). These can be seen as agglomerations of IHPs for a family. The benefits remain largely the same, but the sum insured can be availed by any or all members of the family and not a single person. Rather than buying, say, a Rs.2 lakh health cover for each member of the family of four by spending for a total cover of Rs.8 lakh, if you bought an FF for Rs.8 lakh, each person covered under it can avail benefits up to Rs.8 lakh as opposed to Rs.2 lakh in the earlier instance. Also, it comes at a lower premium than otherwise. A FF can be bought by an individual who becomes the proposer along with spouse, dependent children up to 25 years or even unmarried, divorced, widowed daughter and dependent parent. Even a parent-in-law can be covered.

Critical illness plan (CIP). This is not a substitute for a ‘mediclaim’, but you should ideally add this layer to the latter. It provides financial assistance if the insured develops a serious ailment, such as cancer, or has a stroke. Each cover has a list of ailments, usually 9-12 of them. One can get it in the form of a rider attached to a life insurance cover, or as a standalone policy from either a life insurer or a non-life insurer. If critical illness occurs, it pays the entire sum insured and terminates and can happen only once for any particular illness. To get the payout, the insured has to survive for 30 successive days after the diag­nosis. No claim can be made during the first 90 days of the inception of the policy. The policy term is usually longer (10-20 years) if this cover is bought from a life insurer as a rider than from a general insurer (1-5 years).

Senior Citizens Health Plan (SCHP). Most IHPs cap the entry age at around 60 years, while SCHPs are generally for the age group of 60-80 years. Most can be renewed lifelong or up to the age of 90, and have a fixed coverage of, say, Rs.1 lakh or Rs.2 lakh. Besides looking for sub-limits, those taking SCHP should watch out for certain illnesses as many ailments are excluded from the plan. SCHPs might even have the option to attach a CIP.

Daily Hospital Cash (DHC). Most hospital cash plans might also inconvenience you as they offer the benefit after discharge from the hospital and only after the policyholder produces proof of the number of days he stayed there. Hospital cash benefit has a pre-defined limit in most cases, say Rs.500 per day for up to 50 days in a year and up to 250 days during the entire term.

Unit-Linked Health Plans (ULHP). These are mostly defined benefit plans-usually for the long term-and, unlike a stan­dard health insurance policy, the payout is not dependent on the costs actually incurred. Health Ulips are made up of two parts-a health plan and a unit-linked investment plan. Although these policies are being sold by life insurers, they may not cover life risk. Out of the premium one pays, a portion goes towards medical coverage and the rest of the premium is invest­ed in a fund that operates like a mutual fund.
Covers from life insurers. Life insurance companies, too, have started offering health plans. Most of these are, however, defined benefit plans-the pre-specified amount which is the sum insured is paid as compensation, irrespective of the actual amount of expenses incurred. Also, these are long-term, hav­ing a fixed premium for, say, three, five, or even ten years. Most of the types of plans discussed above are on offer. Some will even throw in a life cover for good measure.

WHAT TO BUY

The strategy. An IHP should form the base of your health insurance portfolio. Alternatively, if you have a family you could go for a FF to form the base cover. To add a second layer of protection, you could go for a CIE. If you have a special condition, such as cancer or diabe­tes, add the third layer of a special cover, such as a cancer plan or diabetes cover. Do not mix up your life and health policies. The needs are different and cannot be compromised.

The timing. Buy a cover as early on in life as possible and defi­nitely before you turn 45. If you procrastinate, diseases could surface and get excluded from your cover under the ‘pre-exist­ing disease’ clause. Of course, lately there have been products where pre-existing diseases are being covered, but that is subject to specific conditions. As you are likely to make no or few claims in earlier stages of life, you can get the benefit of no-claims bonus for every claim-free year. Do not rest assured in the fact that your employer covers your medical expenses. What if you fall ill between jobs? And buying a health cover without exclu­sions after you retire at, say, 60, will be much tougher.

The maximum renewal age. One of the most important things that one needs to look at the time of buying a health plan is the maximum age up to which the insurer would allow renewals. The higher this is, the better, since your medical expenses are likely to increase with age. Changing insurer at a higher age has a high probability of being looked at as a fresh policy with no prior coverage.