In my last column, I suggested nine points to examine before you decide on the insurer- the company from which you will buy the health cover. Once you have taken care of the nine points, the next question is how much medical cover you need to take.
Well….. It depends on certain factors. First where you reside and what type of privacy- single AC (deluxe?) or twin sharing facility you would like to have.
If you reside in Bhubaneswar or Mumbai – the medical cost will vary.
You must be aware that most of the corporate five-star hospitals have to make profit at the patients’ cost. A single room AC deluxe may cost you Rs10,000 plus in posh hospitals whereas the same room in a standard no frills hospital may cost only Rs 3,000 or less (depending on where you stay). Besides, all your costs will be higher if your choice is posh hospitals.
If you prefer a standard hospital with good medical facilities which offers cost-effective treatment, your health cover requirement will be reasonable.
However, my suggestion is you should have a cover of Rs 5 lakhs to Rs 15 lakhs for a family of four (Family floater was explained in last column). Now, the choice is yours.
The Premium
For your health cover, every year you have to pay a premium to the company. Please note that the premium will change with time. For example, one company charges a premium of Rs 10,000 p.a. (for a family of four) when your age is 35. The company may charge you Rs 18,000 when you are 45. (Generally, they consider the age of the family members). Another company may charge you 10,000 for a 35-year-old but Rs 15000 for a 45-year-old.
So, you must compare the premium charged by different companies at your age and at different age intervals. Once you are convinced, you may buy a health insurance plan. (It is advised that you should consult your financial advisor or a reliable health insurance agent/broker before you take your final decision.)
Top Up
Once I met an old acquaintance. Mr Sharma, an employee at a private firm, said he was planning to meet me.
“Sharmaji.. Aap kabhi bhi aa jana. Lekin baat kya hai”
He said he purchased in his early days a health insurance cover for Rs 2 lakhs only for him and his wife (They don’t have children). Looking at the present healthcare cost he was of the opinion that this sum is not sufficient.
“You are right “ I promptly replied.
He wanted to continue this policy as he has accumulated some “No Claim Bonus” (We discussed in earlier article about “No Claim Bonus”) and asked for suggestion.
I suggested, “Sharmaji, rather than going for a new policy, you should go for a top up of Rs 3 lakhs to Rs 5 lakhs.
“What’s the top up”? He enquired.
I explained. Top-up health insurance plans are regular health insurance plans that cover hospitalization expenses but only after a threshold limit that is called the deductible. Deductible in health insurance is an amount that you as an insured are required to pay first before the health insurance company pays for the policy coverage.
Looking at Sharmaji, I understood, he was not very clear.
“Sharmaji, you already have a cover of Rs 2 lakhs. Now if you can buy a top up of Rs 5 lakhs, payable after Rs 200,000 deductible. So, if your hospital bill is Rs 3 lakhs, you will pay from your basic policy Rs 200,000 and Rs 100, 000 from top-up.”
Sharmaji smiled, “I didn’t know this” and looked interested.
So that’s all about top up. But remember, beyond an age, many companies do not offer top up. At that stage it will be better if one can get group health insurance cover offered by some of the banks with a tie-up with health insurance companies. Or else, you have to create “Medical Cost Fund” (More about this later).
Critical Illness Cover
Very often we hear some of our friends, relatives suffering from cancer or suffered a stroke or had a kidney failure. Some of these can happen at any age and a few are life style diseases which may strike you at later stage of life and you are caught off guard.
Smita, our next door neighbour, was almost in tears when she was telling about her sister’s life. As her sister’s husband was suffering from cancer, they have already spent a lot and now they are using the savings which they made for their only daughter’s marriage.
We were really sad and decided to help them from our society. You need to take care of the financial burden these diseases put in most of the families.
A critical illness health insurance policy pays out if you are diagnosed with one of the critical illnesses listed in the policy document. If you have this policy and are diagnosed with a critical illness, the policy will pay you a lump sum. It is not necessary to use this lump sum amount received to pay for medical expenses only. You can use it as per your requirement, to pay off debts, to pay for a child’s education, to avail treatment abroad, or otherwise.
A critical illness insurance plan covers you for cancer, stroke, paralysis, kidney failure, heart attack, and heart valve replacement due to defects or abnormalities. (Check the list from your agent and the website of the insurer)
Most health insurance plans provide “critical illness rider cover” on payment of an additional premium that helps the insured pay for exorbitant hospitalization and treatment expenses.
These plans are specially designed to compensate for the loss of income and treatment expenses in case the insured suffers from a critical illness.
Types of Critical Illness Health Insurance Covers
Critical illness covers offered by insurance companies come in the following ways:
Rider: A health insurance rider, (Sometimes called add-ons) is an additional benefit that you can add to a regular health insurance policy by paying an additional premium. In this case, the coverage is defined by the base policy under which the rider is bought.
Standalone Policy: A standalone critical illness policy is a fixed-benefit policy that covers the insured for all critical illnesses. In terms of the amount insured, this is more flexible. A medical test is required to be covered under this plan.
Please note that the payout is applicable only when a critical illness is diagnosed. This means that you will be covered only if a doctor confirms that your illness concurs with the policy's definition of 'critical'. In all other respects, no payment is made.
Cost
These types of policies cover a wide range of illnesses, conditions and situations. So one must compare what different insurers can offer you.
Cost is affected by:
• your age
• whether you smoke or have smoked
• health – your current health, weight and family medical history
• Types of occupation - Some have higher risk than others, making the premiums higher too
• Level of cover. (A minimum cover of Rs10 lakh is advised by many insurance experts. However, you have to take the final call after discussing with your agent or broker).
By Binodgopal Mukherjee
An alumnus of IIM Kolkata and has more than 30 years of experience in financial services and has worked with different companies like Karvy, Motilal Oswal and Religare Securities. He resigned from Religare as Associate Vice President and joined academia to pursue his passion. He has wide experience in personal finance and investment domain.
(Caveat: People are requested to consult with their own financial advisors or do their own due diligence before buying a health cover.)