Is your Health Insurance armour in place ? Business Line

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Healthcare costs are rising and so are health risks. Have you protected yourself with the right kind of insurance policy?

Most Indians buy insurance for all the wrong reasons — to get tax breaks, for some ‘compulsory’ savings or at the insistence of a niggling insurance agent. Few seem to realise the importance of insurance to protect against risk. Regardless of the stage of your life, you need a life insurance cover to secure your dependants and a health insurance policy to cover your medical expenses.

Medical costs are rising in the double digits. A heart bypass surgery that cost about ₹170,000 two years ago now costs about ₹2 lakh. A coronary angiogram now costs ₹18,000, up from around ₹14,000. But the awareness about medical insurance is still very low in the country. An IRDA study shows that only 17 per cent of the people in India own any form of health insurance, with a large number using group health covers taken by the government or their employer.

While insuring yourself is necessary, there is no one-size-fits-all solution. The kind of insurance cover you need, the size of the sum assured and the add-ons or riders that you opt for will all depend on your age, income, number of dependants and medical profile.

The choice of policies is best illustrated with live examples. That’s why we decided to profile five investors who are in different life stages. We’ve suggested appropriate insurance policies for each of them. You can use the profile closest to yours to guide you. Premium figures given in the story have been sourced from policybazaar.com and Medimanage.

Single, with dependant parents

Venkatesh is 29 years old. He has been working with an IT company for the last five years and earns about ₹4 lakh a year. He has an education loan outstanding, amounting to ₹6 lakh. But for a small amount in the Public Provident Fund, he has no other investments. He has a term insurance cover for ₹2 lakh, taken two years ago for tax savings. His parents are dependent on him.

Suggestion

Venkatesh, you need to increase the sum assured in your life insurance policy. It should be enough to cover the outstanding loan and also make up for the loss of your income in your absence.

Generally, as a thumb rule, the sum assured on your term life policy should amount to at least 15-20 times your annual income.

A ₹50/60 lakh life cover should be ideal in your case.

Buy a pure term plan online; online plans usually work out to be the cheapest (they don’t pay agent commissions). A pure term cover with a ₹50 lakh sum assured for a 35-year-term will cost you about ₹4,200-4,600 towards annual premiums.

You should also purchase a medical insurance policy. You may be covered under your employer’s group medical cover. But as you are at an early stage in your career, job changes are likely. Hence, it is not prudent to rely on your employer alone for your health cover.

Unlike a few years ago, health insurers now have to offer policyholders the option to renew their policies as long as they live. So, once you buy a health policy, you can be worry-free for the rest of your life.

People who develop health complications as they grow older run the risk of insurers rejecting a health cover or adding a waiting period clause. Do note that once a person is diagnosed for a health condition that requires medical treatment, a health insurance policy will cover hospitalisation due to that disease only after a mandatory ‘waiting period,’ which can be between two and four years.

We suggest you buy a plain health insurance policy that covers hospitalisation expenses for ₹3 lakh to ₹5 lakh. Do not opt for a personal accident or critical illness rider, unless you really want them — riders will increase your base premium. A ₹5-lakh health insurance policy will cost about ₹4,000-6,000 as annual premium. This policy will cover all your medical expenses that are incurred for any hospitalisation for 24 hours or more.

Apollo Munich’s Optima Restore and Religare’s Care are good. For expenses on out-patient treatment, keep an emergency reserve. OPD covers are very expensive; it doesn’t actually make sense to buy one.

For your parents, buy a separate health insurance policy. Adding them to your own health plan, through a family floater (where the sum insured can be used by any member of the family) cover is not advisable as it will increase your premium outgo sharply.

In family floater plans, premium is decided based on the age of the eldest family member.

Senior citizen health covers do not come cheap. But health insurance for your parents is necessary to limit your out-of-pocket medical expenses. A ₹5-lakh health policy will cost about ₹20,000-24,000 by way of annual premium.

However, insurance cannot be the sum total of your investments. Once you acquire these plans, you will also need to make a start on investing towards other financial goals, such as retirement.

Married, in joint family with dependant parents

Harini Ramachandran is 25 years old. She got married recently. She has a personal loan of ₹1.25 lakh that is outstanding and plans to borrow another ₹25 lakh shortly for constructing a house. Her annual income is ₹4 lakh. She holds a life insurance policy for a sum assured of ₹50 lakh. Her parents are dependent on her.

Suggestion

Harini, you should increase your life cover as you are planning to take a loan shortly. In the case of an unfortunate event, your spouse should be able to repay the loan as well as substitute your income, using the proceeds of your term plan. You would need an additional ₹25 lakh cover. Do it online, the annual premium for a ₹25-lakh life insurance policy would be about ₹3,000 for you.

Next, buy a medical insurance policy. Most health insurance policies cover maternity expenses today, but with a waiting period of two-three years. Religare Health Insurance’s new plan has the shortest waiting period on maternity cover — nine months — but the premium is high. You can take a medical insurance policy with sum insured of ₹3-5 lakh. If you wish to, include your husband also in the policy and take a floater cover. Apollo Munich, Religare Health and HDFC ERGO can be considered. If you buy a health policy covering just yourself for a sum insured of ₹5 lakh, it will cost you a premium of ₹5,000-8,000 a year. Religare’s new health plan, which covers maternity expenses after nine months, will cost about ₹67,500 — for three years for a ₹5-lakh cover. You have to necessarily take the policy for three years.

Buy a separate health insurance cover for your parents. Though plans in the market let you add your parents also in a floater cover, it is not advisable as it increases premium costs significantly. Senior citizens of age up to 70/75 years can get a separate health insurance policy today. Bajaj Allianz, Star Health and Apollo Munich are some that offer it. However, note that most of these policies come with a ‘co-pay’ condition, which means you need to bear a portion of the actual costs, if you make a claim. A ₹5-lakh sum insured senior citizen health policy will cost about ₹20,000-24,000 as annual premium.

Married, with dependant children and wife

Sankar Annamalai is 39 years old. His wife and two children are dependent on him. He has a home loan due of ₹1 crore. He has some investments in equity. He has a life insurance policy with a ₹1-crore cover, but no health insurance.

Suggestion

Sankar, though you have a large term insurance cover, you need to enhance it. Your existing life policy of ₹1 crore sum assured will cover only your home loan liability. You need another policy to cover the loss of income in your absence. We suggest that you take another term cover with sum assured about 15-20 times your annual income. An online life policy for ₹1 crore will cost ₹15,000-16,000 as annual premium.

Though you are covered by your employer for medical expenses, it is advisable to buy a medical insurance policy. This will come in handy in case you decide to move jobs. Considering your age and the size of the family, a ₹5/7 lakh sum insured floater cover would be ideal. You can go for a higher sum insured if there is a history of any medical ailments in the family. A family floater plan is suggested because it has the flexibility of letting any family member use the total sum insured and your children, being very young, will not use up a significant portion. This will cost you ₹12,000-14,000 as annual premium.

You should buy a critical illness health policy too as you will soon be stepping into your 40s. Premiums on critical illness policies are cheaper compared with normal hospitalisation plans. Here, the sum insured is given on the first diagnosis of the listed illnesses.

The policyholder can use the policy amount to pay for any expenses — not necessarily those arising out of hospitalisation. Most critical illness policies cover as many as 25 or 30 illnesses, and the only condition is a 30-day period survival clause. However, remember that most policies don’t cover pre-existing illnesses. Apollo Munich’s critical illness policy covers 37 illnesses — the most number of illnesses covered by any health insurer in India.

If you take a ₹10-lakh sum insured critical illness policy from Apollo Munich, it will cost you ₹6,500 a year. You can also consider Max Bupa’s policy but it covers only 20 critical illnesses.

In early 50s, married, with grown-up children

Guruswamy Raj Govindan is 50 years old. His wife and two children are dependent on him. He has an outstanding home loan of ₹9 lakh. He has a life insurance cover for ₹9 lakh and a family floater health insurance policy for ₹20 lakh, for which he pays an annual premium of ₹25,000. He wants to know if he can reduce his health cover and save on premium.

Suggestions

Guruswamy Raj Govindan, you need to increase your cover under the life insurance policy. If you have not renewed your policy for this year, request a higher cover from your existing insurer.

Otherwise, take a new life policy. Your present life insurance policy covers just your home loan liability, but you need protection against loss of income and make provision for your children’s education too.

Take a term cover for ₹2 crore. Split this into two policies of ₹1 crore each and take it from two different insurers. This is just to spread your risk. A ₹1-crore cover will cost about ₹30,000-35,000 a year.

You are right to think your health cover is a little too large. For your family, a cover of ₹10 lakh should be ideal. If you want to reduce your sum insured, you can either port to a new insurer or ask your existing insurer for a lower sum insured in the same policy.

Health insurance regulations allow porting of policies, but note that the new insurer will ask you to undergo a medical test again. Even if any minor health condition is detected, your proposal could be rejected.

But if there is no problem and you are offered a cover, the waiting period under the new policy will be adjusted for the waiting period you have already undergone in the old policy.

For instance, if the new policy has a four-year waiting period requirement and you have already spent three years in the old policy, you will be required to spend just one additional year in the new policy.

When you are taking a fresh health policy, split the sum insured between two policies — cover your wife and one child under one policy and yourself and the second child in another policy — this will let you save on premium.

In a floater policy, the age of the eldest member is taken to calculate premium. Premium for a ₹5-lakh health insurance policy to cover yourself and your son will cost ₹11,000-12,000 a year. Premium on a health policy to cover your wife and the other son for sum insured of ₹5 lakh will be ₹8,000-8,500. However, we suggest that you first ask your current insurer if he can shrink your cover.

You should also buy a critical illness policy; it is like an income supplement. To pay for expenses that are non-medical in nature, a critical illness policy will be of help. A ₹10-lakh sum insured critical illness policy will cost about ₹13,000-20,000.

The Apollo Munich critical illness policy that covers about 37 illnesses will cost ₹19,663 for a person of your profile. You can also consider critical illness policy of Max Bupa or Religare that covers about 20 critical illnesses.

Retired, with no dependants

Ajit Pal Singh Pasricha is a businessman. He is 64 years old. His wife is a partner in his company. He has an endowment life policy that gives him a sum assured of ₹8 lakh. He has a health insurance policy that offers a cover of ₹2 lakh. Now, he wants to increase his sum insured under the policy, but the insurer is not willing to do so.

Suggestion

Ajit Pal Singh, you do not require a life insurance policy at this stage as you state that your wife is independent and there are sufficient investments to cater to her needs. Since the premium payment term for the endowment policy is over, just continue with it until maturity.

But you need to expand your health insurance cover. There are two options for you to consider. One, you can buy a top-up health cover. These policies work after you use up the sum insured of the base policy. In your case, the top-up will kick in once you use up your existing cover for ₹2 lakh. Top-up plans should be bought from the same insurer from whom you made your initial purchase — because the features need to match, else there will be problems at the time of claim.

But note that the insurer can specify a higher threshold limit than what you have as sum insured in your existing policy, and there will also be a ‘maximum entry age’ criteria. The other option is to buy a senior citizen health policy. A senior citizen health policy for a cover of ₹5 lakh would cost about ₹25,000 a year as premium. Max Bupa, L&T Insurance, Star Health & Allied Insurance, Religare and Bajaj Allianz are some of the players that offer senior citizen health policies.