THE possibility of one undergoing some kind of expensive health treatment during the lifetime is much more than a sudden demise. Given the cost of treatment at private healthcare facilities, it's almost beyond reach for the Indian middle and lower income class to meet such expenses. Despite that, the penetration of health insurance in our country is extremely low. Only about 2% of the India's population is covered under medical insurance.
This is partly because of a lack of understanding of various products and the need for these products. There is a wide range of health products available in the market, each with its own advantages and drawbacks. Understanding them is important to make the right choice.
INDIVIDUAL HEALTH PLAN
The simplest form of health insurance is the individual mediclaim policies. It covers hospitalisation expenses for an individual for up to the sum assured limit. The insurance premium is dependent on the sum assured value. Unlike in the past, most plans now come with sub-limits for each of these heads.
Drawback:
There are restrictions in terms of preexisting ailments, out-patient treatments and other exclusions. There is a limit on maximum age at entry.
FAMILY FLOATERS
These plans consist of shared Individual Health Plan. The benefits are mostly the same, but the sum insured can be used for the treatment of any or all members of the family and not a single person. This reduces the need for you to pay from your pocket. It comes at a lower premium.
Drawback:
Most family floaters have an upper age limit of 55 years or 60 years. Moreover, coverage of children under this policy will cease once they reach 25 years. Therefore, a family floater is more suitable for a young family.
CRITICAL ILLNESS
This is not a category in itself, but an addition to the individual or family floater health plan. In India, these plans are sold separately, this is a major flaw in the sales of health insurance. An illness plan provides financial assistance if the insured develops a serious ailment, such as cancer or has a stroke.
Drawback:
This is not a comprehensive health insurance cover and only covers specific situations. Moreover, a diagnosis of a critical ailment like cancer, for example, may not be enough to trigger payment of the policy if the cancer has not spread or is not life threatening. Other restrictions may include a specific number of days the policyholder must be ill or must survive after diagnosis.
SENIOR CITIZEN HEALTH PLAN
Most basic mediclaim plans cap the entry age at around 60 years while Senior Citizens Health Plans are generally for the people in 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.
Drawback:
One should watch out for the illnesses as many ailments are excluded from these plans.
DAILY HOSPITALISATION PLAN
Hospital Cash Plan is a daily cash benefit insurance policy that assists the policy holder to meet all his/her miscellaneous expenses during the period of their hospitalisation generally not covered in the regular health insurance. It acts as a supplement to the health insurance policy.
Drawback:
These plans are not sufficient in themselves as they only cover hospitalisation expenses and not medical costs.
UNIT-LINKED HEALTH PLAN
Although life insurers are selling these policies, they may not cover life risk. Out of the premium paid, a portion goes towards medical coverage and the rest of the premium is in the stock market just like a ULIP. They are defined benefits and the payout is not dependent on the cost actually incurred.
Drawback:
Linked to market, they are subjected to market risks and also costs like fund management charges.
MEDICAL COVER FROM LIFE INSURERS
Life insurance companies, too, have started offering health plans. These are long-term, having a fixed premium for, say, three, five, or even 10 years. These policies do not need to be renewed every year. There are variations in this policy, including some cash back policies also.
Drawback:
Claim procedure is relatively difficult in health policies provided by life insurers. Claim settlement ratio is higher at general insurance.
