Should you go for high health insurance?
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April 2016Most individuals fear that their health cover of Rs 5 lakh or Rs 10 lakh won't be enough to take care of a medical emergency. They believe advances in medical science, along with the rising cost of treatment, medications and procedures, may wipe out their savings and investment if they contract some serious or critical illness. The fears are not exaggerated.
For example, an organ transplant, say, of liver or lung, can cost Rs 20 lakh to Rs 40 lakh. Even the new medicines for cancer and other serious illnesses cost Rs 500 upwards per tablet. However, most insurance companies offer a maximum health cover of only Rs 10 lakh. But the signs of changes are already there.
Religare Health recently launched Care, a health insurance policy that offers sum insured of up to Rs 60 lakh, the highest offered on any health insurance product in the country. ICICI Lombard and Max Bupa Health Insurance already have products that offer health cover of up to Rs 50 lakh.
Due to advancement in technology and medical science, many new procedures have been adopted in critical surgeries and treatment of severe illnesses, which come at extra cost. Also, a change in lifestyle is encouraging individuals to take treatment in super-luxury hospitals. These factors, along with the inflation in healthcare cost, are forcing individuals to look for enhanced sum assured. Individuals with adverse family history should go for a higher sum assured if they can afford the premium. Wealthy people looking for advance treatment and services in superluxury hospitals can also go for such large sum assured.
Also, many people are increasingly opting for medical treatments outside India for critical illnesses. Some of these health insurance products cater to that need, too. For instance, Care covers costs related to medical treatments outside India for individuals opting for a sum assured of above Rs 50 lakh. This policy provides coverage for hospitalisation abroad for cancer, benign brain tumour, major organ/bone marrow transplant, heart valve replacement, and heart bypass surgery, for a sum insured of Rs 50 lakh and Rs 60 lakh.
DO YOU NEED HIGH COVERS?
Experts are unanimous that a cover of Rs 10 lakh may not suffice for treatment of any critical illness, especially in the metros. A certified financial planner, says, "People won't have any choice but to visit premier hospitals if they contract any serious illness. In Mumbai, a room in these premier hospitals costs Rs 5,000 to Rs 7,000. A room in the ICU would cost at least three to four times the normal room." According to him, if an individual can afford the premium, he or she should go for the maximum health cover.
Still, affordability could be an issue for many people. For example, the premium for a health cover of Rs 50 lakh can be in the wide range of Rs 27,000 to Rs 50,000 for a 35-year-old individual, depending upon the product and the number of family members covered by the policy. The renewal premiums will be higher after factoring in inflation and healthcare costs. These policies do not have a claim-based loading at renewal. However, the premium of every policy increases after 1-2 years because of inflation and rising healthcare costs. So you have to factor in the potential hike in premium when you budget for such high-value policies.
We will advise a client to go for the maximum health cover. If affordability is an issue and will ask them to strike a balance. Striking a balance is very important because one shouldn't channel all the savings towards health insurance premium.
From a financial planning perspective, risk is only one of the components that includes term insurance, health insurance and home insurance. So a retail investor cannot afford spending Rs 30,000 only on a health insurance policy when he/she has to think about building a retirement corpus, saving for child's education, etc. And the premium will only go up as he ages.
If you can't afford the premium, you should try to add a top-up health cover to your existing Rs 5 lakh or Rs 10 lakh cover. The maximum top-up cover available in the market today is Rs 15 lakh. If you are comfortable getting treated in tier-2 hospitals, a cover of Rs 10-15 lakh in an urban area should suffice.
Another way out for people who can't afford the premium for high covers. "You should start building a corpus of Rs 5 lakh for medical emergency. You can use this corpus for treatment of your minor illnesses."
DON'T MISS THE FINE PRINT
A large cover doesn't mean it will reimburse every expense. Pay attention to factors such as the network of hospitals, sub-limits in the policy, exclusions, waiting period for pre-existing disease, additional benefits such as maternity cover, neonatal cover, dental treatment and so on. In case of high-value policies, there may not be any caps or sub-limits on the room rent. However, there may be a definition of the category of the room covered by the policy. Just like health policies with small sum insured, these policies also have a co-pay clause at 20% for senior citizens. So if you opt for tier-1 hospital for medical treatment, the 20% ratio to be borne by the patient will be a heavy sum.
Source: economictimes
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