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Life Insurance - Enhance your health cover to beat healthcare cost inflation

25 Feb 2013

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You need a larger health insurance cover." You are likely to hear this statement more than once in the coming year. Insurance companies, their sales forces and financial advisors are likely to cite medical inflation and high incidence of lifestyle diseases to prod you to go a for a larger health cover.

"Medical inflation is rising at the rate of 18-20% every year. With healthcare cost going up, people are realising that a cover of 2-5 lakh provided by their employer or existing health insurance policy may not be adequate," says Manasije Mishra, CEO (designate) of standalone health insurer Max Bupa. Advances in the field of medicine are another factor. "It is a reality that cost of treatment, especially in case of serious ailments, is going up. But, this is not merely on account of medical inflation. The cost of treatment is also going up as the quality and technology applied to treatment is improving, resulting in better results, but at a higher cost," adds Arvind Laddha, CEO, Vantage Insurance Brokers. In 2012, two general insurance companies launched high-value policies of 50-60 lakh.

Also, two top-up plans were launched during the year. "In the initial years, insurers focused on selling conventional products and there was not much product differentiation. Largely, regular health policies were sold to individuals. Now, companies are taking it a level higher with enhanced offerings like top-ups," says Mukesh Kumar, head, HR, marketing and strategy planning, HDFC ERGO, which rolled out a top-up plan this year. Companies like ICICI Lombard, Religare Health, Apollo Munich and Max Bupa now offer high-end covers of up to 50-60 lakh. Top-up plans are offered by most private insurers including ICICI Lombard, Bajaj Allianz, HDFC ERGO, Max Bupa, Star Health and also PSU insurer United India.

DOING IT THE RIGHT WAY

Should you go for a new policy that offers a large cover? Or should you buy a top-up plan? Top-up plans, which act as add-ons to your existing health policy, come into picture once you exhaust your existing cover. Some new top-up plans also allow you to pay a particular amount from your pocket. "Top-ups can be purchased by policyholders with an existing base cover as well as those who volunteer to meet the initial expenses - up to a threshold level - out of their own resources. The top-up will be triggered if the cost of hospitalisation exceeds this pre-agreed amount," explains Sanjay Datta, chief (underwriting and claims) at ICICI Lombard. However, some companies insist on a base policy - which need not necessarily be bought from them - before offering the add-on.

"Our top-up product is offered only to those policyholders who already have a base indemnity policy. They have to provide details of their existing regular health policy before buying the top-up," says Mukesh Kumar. Buying a top-up plan is very similar to buying a regular health insurance policy. You can approach an insurer who sells top-up policies, furnish details of your existing policy and undergo medical check-ups, if required. The company will specify the premium amount based on your age, state of health and, of course, the cover amount chosen. If you are comfortable with the premium amount, you can go ahead and buy the top-up. When it comes to making claims, you may be asked to furnish details of the amount claimed under your base policy.

"You should compare the features of top-up plans carefully. Some companies offer top-up plans that get triggered only when a single claim breaches the threshold limit. Then, there are products, including ours, that take aggregate of claims made during the year into account," explains Mishra. For instance, say you have a base cover of 3 lakh and a top-up plan that comes into play if your single claim exceeds this figure. Here, the company will not pay the claim if you make multiple claims in a year that collectively cross 3 lakh. On the other hand, say you’ve bought a top-up that factors in total claims made in the year. In this case, if you make three claims of 50,000, 1 lakh and 2 lakh during the year, the sum of these claims will ensure that the top-up threshold gets triggered. "Therefore, such top-ups carry a higher utility value," he says. "Top-ups can come in handy especially for those with group mediclaim policies.

This apart, we also offer top-ups to employees through their employers. Unlike the base corporate covers, such top-ups will continue to be in force even if the employee switches jobs," adds Datta. However, it is not a good idea to bank on your company cover alone because the cover may get terminated the moment you leave the organisation. That is why it is important to buy one individual health policy, irrespective of whether your employer provides you a health cover or not. "If someone has a corporate health cover, it may be advisable to have a personal health insurance policy for a sum of 3 lakh or so rather than a top-up policy," says Laddha.

TOP-UP VS FIXED BENEFIT POLICY

If you are covered under a corporate policy, there is a third alternative you can explore. Several companies, primarily life insurers, sell policies termed fixed benefit plans. Here, a pre-defined amount is handed out to you when you make a claim, making the process hassle-free. Of course, a top-up would be still cheaper. "In terms of cost-effectiveness, top-up is a better option in the short term. However, you would be well advised to have a fixed benefit policy at a personal level so that you can depend on it in the event you do not have the corporate cover for any reason," says Laddha.