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Health Insurance: Company cover may not be sufficient

Many people don’t buy health insurance as they are covered by their company and as they are young, don’t feel the need as well. Here is the issue with that…

  • Company covers you under and group policy, which may not be sufficient for critical illness or a major surgery.
  • You lose the medical cover when you quit the job or when you retire – this is when you need it most and you won’t be able to buy it then.

With the rising healthcare cost, it is imperative for everyone to have a Health insurance. It doesn’t cost much if you plan it well. Its better to take a health cover for you and family before you turn 40…max 45. You get a lower premium with No or minimal medical tests.

Example : 
A family floater plan for a small family for a 5 lakh cover will cost approx. between Rs 12000 to 15000 /year and a top-up of 20 lakhs will approx. cost another Rs. 3000 to Rs. 5000 /year. So with  Rs. 15-20k/year premium, you can get a 25 Lakh medical cover for you & your family. With just Rs 1500/month, you would be financially ready to handle any medical emergencies.

While, this is just an example and the numbers will change based on your age, family members, pre med condition, smoker-non smoker etc but if you plan it well, with a small monthly amount…you can have a good cover.

Type of Health insurance :

There are two types of health insurance plans: indemnity and defined benefit plans.

A basic health insurance policy that pays for your hospitalisation expenses is an indemnity product. It pays for your hospital bills up to the sum insured. This coverage also includes pre- and post-hospitalisation expenses and listed day-care procedures.

A defined benefit policy, on the other hand, pays a stipulated sum on an insured event. Both life and non-life companies can offer defined benefit plans.

Policies like hospital cash policy, major surgical benefit policy and critical illness policy are defined benefit plans.

A critical illness policy is the most popular defined benefit plan. It pays the insurance cover—or the sum assured—on diagnosis of an insured critical illness; it doesn’t matter what the hospital bill is.

Most of these plans cover critical illnesses such as cancer, kidney failure, heart attack, major organ transplant and stroke. But you need to keep in mind that typically these plans terminate after the first claim and few plans that cover multiple critical illnesses, cap the benefit amount. What you should also keep in mind is that critical illness plans come with a survival period clause of a month. In other words, you need to survive for about 30 days after a critical illness is diagnosed to make a claim.

Given that indemnity plans reimburse your hospitalisation costs, you need to buy them first. Defined benefit plans need to be seen as income supplement plans and can be taken over and above indemnity plans.


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