In the best of health

Health insurance products are mushrooming and it's getting tougher to discern the best option.

Here's what you should know.

You have probably got dozens of cold calls from insurance agents selling the latest healthinsurance plans. With life insurers also offering healthinsurance products, your options to get yourself a health plan have increased. Besides, there are many policies in the market covering individuals, families, senior citizens and a host of separate illnesses, even those that are critical. Essentially, most plans have a basic structure covering some common illnesses, but what matters is which type of plan has the most advantages.

Which plans work best with the least cost?

The sheer number of plans means trying out a few of them will cost you money. You also lose the advantage of continuity and cover on existing ailments when you switch between insurers. But begin your search for health insurance keeping in mind your family's medical history, like 39-year-old Ravishankar did when he took a Family Health Insurance plan from ICICI Lombard, covering himself and family (wife and two children) for Rs 5 lakh in 2003. Critical illness is partly covered through an added feature in his normal life insurance cover. He plans to increase cover in the coming years after analysing various policies. Says Ravishankar: Anu and I have diabetics in our family tree, though at the moment none of us has any problems. We need to add more cover in the future.

Basics first

For starters, begin with a simple Mediclaim policy from a general insurer for about Rs 3 lakh, which covers a range of ailments. At about the age of 28, this amount of cover should suffice, but you may want to increase it as you grow older. Medical costs have increased and a bypass will set you back by around Rs 2 lakh, while complex surgeries cost more. Most ailments are covered in a basic Mediclaim plan, though certain conditions such as cosmetic surgery, existing war injury or dentistry are not covered, mainly to prevent misuse.

Insurers don't usually cover preexisting diseases you already have. In some cases, insurers insist on a claimfree period, during which you cannot make any claims for your existing diseases. Therefore, it's advisable to take a policy at a younger age when your health is better. General insurers reimburse medical expenses you incur provided you have given accurate data of your medical history. Some general insurers may refuse reimbursement if pre-conditions are not met. With his earlier insurer, Ravishankar had run into some problems on claims.

After a few years, when you have children, include them into the policy cover. Diseases like hepatitis, typhoid, malaria may affect children and could result in higher premiums when you make a claim against medical expenses. Here's where a family floater helps, although you may not want to go overboard. A usual Rs 5-lakh floater cover is best when covering your children but individual covers with separate insurance limits are the best. Premiums for floaters are more expensive than warranted and could result in disproportionate loading on renewal for any one claim.

A value-for-money alternative is Star Health's family-floater policy that costs Rs 3,811 for a Rs 2-lakh cover and it covers a 35-year-old male with wife and two children. On the other hand, HDFC Ergo General Insurance charges Rs 8,413 for the same. On average, premiums are around Rs 6,000. But the advantages of a family cover are enormous. Each member of the family can get medical costs covered to the maximum of the policy amount. Insurers also allow for part claims within a floater policy, say, for two or more family members as long as the overall policy limit is not exceeded. But a floater may not be ideal for all situations. A floater is fine for a young family that doesn't travel,'' says J. Karthikeyan, certified financial planner with Finerva Financial Solutions.mospagebreak

Advanced cover

Of late, life insurers have introduced unit-linked health plans. Earlier, life insurers bundled critical illness riders with their normal life covers, which provided a lump sum payout if the insured fell critically ill and made a first claim. Thereafter, the additional benefit, also known as rider, lapses.

Life insurers also introduced daily hospital payments along with a standard payout during any critical illness. When you are admitted to hospital, these plans reimburse the expenses on a daily basis to the hospital. LIC was the first to introduce this product with its Health Protection Plan and was later followed by Reliance Life's Wealth Plus Health policy.

Though the premium is higher (the minimum is usually Rs 10,000), these policies offer a huge value proposition. The sum assured is calculated after determining the daily hospital cash benefit you require. Critical illness payouts are made as a part per cent of sum assured, with a 100 per cent payout for serious illnesses. Life insurers, however, decrease the payout for less serious health problems. The maximum cover used in one's lifetime can be three times the sum assured. However, there's a cap on the maximum daily hospital cash benefit one can get.

Your premium is divided into two parts health insurance cover cost and other administrative charges, with the balance invested as per your asset-allocation plan, much similar to a unit-linked insurance plan. Most life insurers offer a choice of assetallocation plans to build a healthy medical expense corpus for you. The only hitch is that the cap on daily medical expenses does not work to your advantage in the long run. Says Anil Rego, Founder and CEO, Right Horizons, a personal finance company: “As the daily allowance is fixed, inflation may result in an individual funding daily hospitalisation expense from his own pocket.”

Special situations

Life insurers may allow you to increase your premium, but if you have a history of making claims, they may reject your proposal. ICICI Prudential Life's Health Saver has got an interesting Mediclaim plus investment plan (unitlinked health plan) combination. The Mediclaim portion works like a typical reimbursement policy (with, of course, the cashless option) but you have to provide original bills. The premium charges deducted from the plan is at par with other general insurers. But if you take a family plan, a large outlay is towards premium, which leaves little for investments in your corpus. Yet there's a small advantage. Unlike general insurers that don't renew policy after you are 60, unit-linked health plans can be renewed till the age of 75.

Some special policies by Star Health and ICICI Prudential allow for such pre-existing diseases like diabetes. While Star Health's diabetic policy is more affordable, it has placed caps on sum assured. With ICICI Prudential, you pay a large premium, but the policy encourages you to manage your health better through incentives such as a reduction in premiums. Further, it provides financial support and a lump sum payout in case the policyholder is diagnosed with critical illnesses like heart disease, stroke, end-stage renal failure, coronary artery bypass graft, major organ transplant, says Binay Agarwala, Senior Vice President and Head, Health Products, ICICI Prudential Life.

By comparison, policies of public sector general insurance companies are cheaper, but the private sector scores on service. An individual plan has more options and choice of cover as compared to a floater. Besides, each individual's medical history and requirement may differ. Hence, shop around for the best deals.

Nitya Varadarajan 

Reproduced From Business Today. © 2009. LMIL. All rights reserved.