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Non Life Insurance - Whom will Arogya Sanjeevani health insurance policy be suitable for?

16 May 2020

The Insurance Regulatory and Development Authority of India (IRDAI) has mandated all insurance companies to provide the Aarogya Sanjeevani Policy from April 2020.

This is a standard health insurance policy for individuals and families which provides coverage up to Rs 5 lakh for basic hospitalisation-related expenses. Also, perhaps to make the product simpler to understand, the regulator has banned insurers from imposing deductibles or offering riders and variants with the policy.

So, should you consider buying the Arogya Sanjeevani policy?

Some financial planning experts believe that such a policy is a good entry-level product. Others believe that the insurance coverage of Rs 5 lakh is not sufficient for covering a family of four (two adults and two children).

Naval Goel, CEO & Founder of PolicyX.com said that the Arogya Sanjeevani policy is a simple basic health insurance policy. "It is relatively cheaper and provides the option of getting a sum insured up to only Rs 5 lakh. Also, it does not have features that a fully loaded comprehensive health policy offers. For instance, it has a co-payment of 5 per cent which might not be there in a fully-loaded policy," said Goel.

However, the regulator has mandated a 5 per cent increase in the sum insured for each claim-free year subject to a maximum of 50 per cent of the sum assured, provided the policy is renewed without a break.

Let us now take a closer look at who should consider and who should not consider buying this health insurance policy.

Who should consider buying it?
The Arogya Sanjeevani policy can be suitable for first-time health insurance buyers because the product not only offers a wide coverage at an affordable premium but the cover, terms and conditions of the policy are also standard (common policy wordings) across all insurers. This makes it easier for individuals to understand the policy.

Prableen Bajpai, Founder & Managing Partner, Finfix Research & Analytics explains why it is a good fit for first-time policy buyers with a limited budget: "Despite the rising awareness about the need for health insurance, its penetration continues to be abysmally low in India. The clutter and complexity of health insurance policies and their unaffordability in terms of premiums have deterred an average household from buying health insurance. his is something that the Arogya Sanjeevani Policy addresses given the simplicity and standardisation in its construct and a reasonable premium structure."

Hence, if you are working but do not have dependents and are unmarried then you can consider buying this policy.

Mrin Agarwal, Founder Director, Finsafe said, "The Arogya Sanjeevani policy is beneficial for younger people who are looking at a comprehensive cover for themselves. The premium is lower than other policies and the policy has a wide coverage including day procedures."

Who it may not be suitable for
As the sum insured under the Arogya Sanjeevani policy is restricted to Rs 5 lakh, as mentioned above it is be suitable for a young, first-time insurance buyer. However, given the high cost of healthcare, a cover of Rs 5 lakh may not be adequate, especially for someone living in bigger cities. "Someone with the capacity to pay higher premiums, living in a metro or a big city should go for a cover beyond the Arogya Sanjeevani Policy to ensure the adequacy of health cover," says Bajpai.

In such a case you can go for other health insurance policies with a higher sum insured. But before buying a policy, you must consult a financial advisor.

Further, if you have dependants, then you can consider buying a family floater health insurance policy. "For those individuals who have dependants including children/ parents, a higher cover is warranted and hence they can choose policies based on coverage and inclusions (as required). Arogya Sanjeevani policy has an upper limit of Rs 5 lakh which will not suffice for families," said Agarwal.

So, if you are looking for a health insurance policy with a higher sum insured or already have a sufficient base health cover, Arogya Sanjeevani policy may not suit you. In fact, you should consider a super top-up health policy.

Most of the insurance experts said that super top-up plans are designed to enhance the health insurance coverage of the existing health care plan. It can be bought as an add-on to upgrade the total sum assured of the base plan as it acts as a supplement to the basic plan and also pays for multiple bill claims. Moreover, buying another comprehensive health policy with a higher sum assured is always expensive. "A super top-up plan compensates for all the expenses exceeding base cover for one-time hospitalisation. The plan is a regular indemnity plan that can be renewed annually. However, you must know that the super top-up plan only comes into play once the deductible limit is crossed," as per insurance industry experts.

Point to note
Even though the coverage of the Arogya Sanjeevani health policy is universal for all insurers, the premium rates and customer service can vary from one insurer to another.

Goel said, "The rates are decided by the insurer based on their expectations of claim ratios, etc which is based on assumptions. The actuarial team of each insurer may make different assumptions and therefore the rates of different insurers may be different. Also, the quality of services offered by all insurers is not the same. This is another reason for the difference in pricing."