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What cover should you take?

We look at the different types of health insurance plans on offer to help you decide what to buy, depending on your age, health and family composition.

Print Edition: Jun, 26, 2008

Accidents and illnesses are a part of life, no matter how carefully you monitor your health. Just think of this: Robert Atkins, the man behind the famous Atkins Diet, which promises health and, by extension, a longer life, died of head injuries sustained in a fall. Of course, not all accidents or illnesses lead to death. But, as Ajay Bimbhet, managing director, Royal Sundaram, says: “Some risks can get you to a state that is, in some ways, worse than death.”

A permanent disability that prevents you from working, for instance, could prove disastrous to you and your financial dependents if you are not covered against such an eventuality. Even a temporary disability or illness that keeps you out of the workforce for a few months could have far-reaching implications—none of them good. Health insurance is your shield against the financial backlash of such accidents or illnesses.

Delhi’s Chandra Shekhar Vaidya knows about life with health insurance— and without. Vaidya had no health insurance in 2005 when he twisted his ankle. “A bill of Rs 5,000 and being away from work for six weeks” made him realise that taking medical cover might be a good idea. He took a Rs 2 lakh health insurance policy from National Insurance in 2006.

If you want to...

You should consider...

Have your medical expenses paidHealth insurance
Receive a fixed amount of cash when you are admitted in a hospitalHospital cash insurance
Reduce your financial burden when you are diagnosed with a major illness (for instance stroke/cancer etc)Critical illness insurance
Pay the cost of any long-term healthcare related problemLong-term health care
Protect your income when you are unable to work, having met with an accidentAccident disability cover— partial or total, temporary or permanent

Pecking order

• Take a critical illness cover when you have dependents (children or ageing parents)

• Third tier (hospital cash) can be added before you get married

• Second tier from the bottom are the expenses covered with a base policy

• Take it when you start working, either as group insurance or a standalone policy

• At the base of the pyramid are routine health care expenses

• You won’t get a cover for these, so set aside an emergency fund for them

Hardly a year or so later, he developed a clot in the brain that left him partially disabled—and with a hospital bill of over Rs 25,000. But, says Vaidya, “My one-week stay in the hospital did not worry me financially, and I was able to recover faster.”

Which is all very well; we have already tried to explain why you need health insurance. The problem begins when you start looking around for the health insurance cover that will best serve your needs without burning a hole in your wallet. The idea is to get the most suitable cover for least annual premium.

Ever since the insurance sector was opened up to private players, there has been a marked increase in the variety of health covers available. With de-tariffing of the sector, experts believe that there will be more specialised products hitting the market. Till then, these are the basic types of health cover you can choose from.

Basic cover: In the health insurance world, these insurance plans are like the term plans in life insurance— basic risk covers. A basic health insurance plan is indemnityoriented; that is, it pays your actual expenses within the limits of the policy. It also means that you can make more than one claim in a year, as long as the total does not exceed the basic sum assured.

So, what exactly is covered? Typically, the benefits include room and board and other hospital services such as x-ray and lab expenses and operating room use. The cover extends to pre- and post-hospitalisation expenses on medication and diagnostics, subject to limits and conditions in the policy.

For instance, 35-year old Chennai-based Dr Vijil Rahulan took a Hospital Care policy from ICICI Prudential Life at a time when he did not foresee any health problems. It was only later that he developed a knee problem and had to undergo surgery for its treatment. “The entire procedure was authorised by ICICI Prudential and the treatment costing Rs 25,000 was paid by them. I just walked out without paying a single paisa,” he says.

Most group insurance plans also offer this cover. The advantage of the group plans is that you can get cover for your dependents who might otherwise find it difficult to get medical insurance. Hyderabad-based Prashanth Reddy, for instance, says: “I was looking for something exclusive for my 65-year -old father who suffers from chronic obstructive pulmonary disease, requiring frequent hospitalisation. However, none of the insurers were willing to cover it.”

When Reddy realised he could sign his father on to his group health insurance plan, he did so. And when his father was hospitalised recently, the insurance company paid the Rs 70,000 bill.

Adinarayana Gupta
Adinarayana Gupta, 75, Bengaluru

Why he took health insurance: Despite not having any health-related problems, he made sure to continue his medical insurance even after he turned 70

Benefits: He had to undergo a routine prostrate enlargement corrective surgery, which cost Rs 1.3 lakh; the insurance company paid for this treatment

Vijil Rahulan
Vijil Rahulan, 35 Chennai

Why he took health insurance: As a doctor, he had seen patients struggle to pay hospital bills, so took health insurance

Benefits: When he had knee surgery, the insurer paid all the bills; he walked out of the hospital without having to pay a paise 

Prashanth Reddy
Prashanth Reddy, 45 Hyderabad

Why he took health insurance: No insurer was willing to cover his father who had breathing problems. He got him covered under his company’s group medical insurance scheme

Benefits: When Reddy Sr was hospitalised, the bill was over Rs 70,000; the group cover took care of it entirely

“Some risks can get you to a state that is sometimes worse than death. Health insurance will help cushion your finances when you are under treatment”

Ajay Bimbhet, managing director, Royal Sundaram

“There is a total lack of awareness of any insurance that does not mention ‘life’; people refuse to look at the health risks they face every day”

—Sitesh Prasad, head, accident and health, Tata-Aig Life Insurance

Life insurance riders: These are one of the most customer-friendly clauses introduced to a life insurance plan. What these do is to give you an option to enhance your life cover with health care. Says Sitesh Prasad, head, accident and health, Tata AIG Life Insurance: “Health riders on a life policy complement a life plan by expanding the scope of cover for a policyholder and also allow him get some form of long-term health cover.” Unlike indemnity-oriented policies, these riders give you lump sum payments irrespective of the amount actually needed for treatment.

Just remember that these riders must be added at the time of buying the life insurance policy; they cannot be added on later. However, the extent of cover can be readjusted. The extent of cover is linked to the amount of the life cover being taken; all riders, when combined, cannot account for more than 30% of the premium on the life cover. Further, any benefit that arises under each of the riders shall not exceed the sum assured under the basic life insurance product.

Hospitalisation cash: The concept of unemployment benefit is alien to this country. This is something that strikes close home when you are put out of action for weeks or months due to illness and prolonged hospitalisation. The hospitalisation cash cover pays you a fixed sum for each day you spend in hospital, totally independent of the room rental and medical treatment costs. “This is especially useful when you have limits on room rent on your basic health insurance plan,” says Swaraj Krishnan, CEO, Bajaj Allianz General Insurance.

It’s a great benefit for those who depend entirely on their wages. It also serves to recompense the person who attends on the patient; often, a family member takes leave from his or her job to attend to the patient. This means the economic loss is compounded. That’s when a hospitalisation cash benefit really works to best advantage.

Critical illness: With health complications on the rise and costs spiralling, one surgery can wipe out significant savings. To counter such calamities, insurers, especially life insurers are offering long-term critical illness cover. “These policies cover a bouquet of critical health risks and are extended for a long period of 20 years and more,” explains Binay Agarwala, senior vice-president and head—health business and corporate strategy, ICICI Prudential Life Insurance.

Life insurers offer critical illness as a rider option as well and it covers limited critical illnesses specified in the policy document. Says Manik Nangia, corporate vice-president and head—product management group, Max New York Life Insurance: “Long-term health insurance of any kind is what ideally is needed.

However, the current delivery mechanism is such that only life insurers can offer long-term products.” Such a systemic lacuna is being tapped by life insurers. And policyholders like Bangar Raju are grateful for this. When Raju had to undergo a kidney transplant, although his health insurance policy would not cover renal failure (because of a fine print that allowed critical illness cover only from the fifth year of the policy), the critical illness rider on his life insurance took care of the bulk of his bills.

Anjana Grewal, senior vice-president, marketing and communication, Birla Sun Life Insurance, says: “These unique riders cover a wide range of illnesses. While other health insurance plans only provide for reimbursement of medical bills, they do not adequately provide the financial protection, flexibility and assistance required for additional expenses resulting from a critical illness.”

Health Checklist

1. Cholesterol/Lipid profile

Price — Rs 500

Women 40 yrs*
Men 30 yrs*

Between 30 and 40 years, stress, obesity and hypertension are the biggest worries

*Age for first test; repeat every five years

2 Blood glucose (for diabetes)

Price — Rs 150

Women 25 yrs*
Men 18 yrs*

Chances of diabetes increase in the 40-50 age group

*Age at first test; repeat every 1-3 years

3. ECG

Price — Rs 500

Women 40 yrs*
Men 35 yrs*

The risk of heart disease goes up in the 50-60 age group

*Age for first test; repeat every 1-3 years

4. Bone mineral density

Price — Rs 700

Women 45 yrs*
Men NA

The risk of osteoporosis, cervical cancer and breast cancer is the greatest for women in their 40s

*Age for first test; repeat every 1-3 years

Contingency plans: An accident can result in partial or total disability, temporary or permanent. Accident insurance plans cover these contingencies, but these plans are strangely not as popular as some other medical covers. Accident insurance generally comes at a low premium. Some variants that cover temporary or total disability offer policyholders a weekly compensation. This is an ideal plan for those in low-paying accident-prone jobs— construction and courier delivery jobs, for instance.

Some insurers even cover outpatient treatment in these policies. However, the conditions for this are extremely restrictive and almost serve as a deterrent to making a claim. There are other plans that cover pre-existing diseases; this is a benefit generally extended only to long-term policyholders.

Because this tends to lock the policyholder with one insurer, there have been noises made about allowing policy portability, in which policy of one insurer passes on to another insurer with some terms and conditions. However, this option is still in the concept and discussion stage and there’s no way of gauging whether it will be successful or not.

Health for all: Unlike life insurance, where cover is based on the concepts of human life value or income replacement, health insurance is egalitarian. As Nangia says: “The risk exposure may be genderspecific or age-related, but the cost of healthcare is same for a man, women or child.”

For instance, life insurers might baulk at offering any form of life cover to 55-year-old housewife, Sushma Chauhan. However, she had medical cover, thanks to her husband, who says: “Her health is important for the optimal functioning of my house and my life.” Chauhan’s medical cover took care of hospital bills of over Rs 80,000 when she had to undergo surgery to get a gallstone removed.

By law, insurance companies cannot deny cover to anyone. However, since the elderly are viewed as bad risks, insurers charge them a hefty premium and insist on giving them policies with more exclusions than coverage. Now, in the wake of concerns for senior citizen’s healthcare needs, certain insurers have started offering plans targeting only the old. These plans have a late entry age and come with basic cover with several exclusions.

Despite the exclusions, it’s still a good product for senior citizens who do not have any health cover. Not all the elderly are as well-prepared as Bengaluru’s Adinarayana Gupta. “At 75, thankfully, I don’t have any of the usual health-related complaints that many of my generation have,” he says. Despite this, Gupta has continued his health plan over the years. This proved to be a good idea when Gupta had to undergo a routine prostrate enlargement corrective surgery. The entire process cost him Rs 1.3 lakh— which his insurance covered.

So age and gender and employment status should not hinder you from taking adequate health insurance. Your best bet is to figure out how much of your health risk you are willing and able to absorb. What is it that you can’t afford to lose financially, and how will that loss impact your long-term finances? Once you know that, you’ll know what to cover and for how much.

That’s why Mariah Carey apparently had her legs insured for a billion dollars, Rod Stewart has insured his voice, while pianist Richard Clayderman insured his hands. Closer home, singer Shubha Mudgal and tabla player Aneesh Pradhan have got customised insurance to cover them if they are unable to perform.

As already touched upon, with de-tariffing, it is expected that insurance companies will also begin offering customised products to cover specific ailments and illnesses. For instance, you might some day be able to get a policy that covers only stress-related illnesses, including computer-related problems or repetitive stress injuries or insomnia (see Prescription for the Future. Till then, make your choice from the available range of plans.

HEALTHCARE EXPENSESEXPLANATIONAVG. COSTAVG. FREQUENCY
Critical IllnessSurgery/cancer/cardiac interventionRs 1.5 lakhOnce in 15 years
Hospitalisation (minimum one week)Any ailment that is not minor and yet not critical, for instance, extreme dehydration, typhoid, bad back, accident, TB and so on70,000Once in 5 years
OPD, Minor Surgeries and treatmentsPre-hospitalisation diagnosis, asthma, hypertension, obesity, diabetes, fracture, etc15,000Once in 3 years
Day to day routine health ailments, diagnostics/testViral fever, cold, cough, headaches and other anaemia, fatigue, gastritis and so on10,000Thrice a year and can increase wth age

 

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