A Matter of Policies

If you are one of those in the market looking to buy a health insurance cover and don't know what to do, don't let tax breaks or huge returns make you jump onboard. Instead, before you proceed, carefully evaluate the following:

General Insurance v/s Life Insurance
Health insurance by a general insurance company is an indemnity cover i.e. the insurer pays only the expenses actually incurred during hospitalisation. Health covers by life insurance companies, on the other hand, offer a specified amount as compensation, irrespective of the expenses incurred. Moreover, while an indemnity policy is renewable every year, health insurance policies from life insurance companies are long term, having a standard premium for a certain number of years. Renewals are guaranteed till the age of 75 years in most cases.

Such policies fall under three categories: critical illness, hospital cash and savings. A critical illness policy gives you a one-time benefit if you contract any of the specified illnesses. A hospital cash policy offers a pre-defined daily cash benefit. A savings plan enables saving by investing a portion of your money or returning your premium at the end of the tenure. A few plans offering a combination of hospital cash and covers for critical illnesses, surgeries, and to some extent, permanent accidental disability are Aviva's Health Plus, Tata AIG's Health First / Health Protector and Bajaj Allianz's Health Care.

Claims Procedure
Health insurance from life insurance companies offers a gamut of choice. These choices are outweighed by the nuisance encountered when you need to raise a claim. For instance, the fine print with respect to the waiting and survival periods of critical illness plans of both life and non-life insurers are a real hassle. Insurers usually don't entertain a claim during the initial six months of these policies. A bigger worry is the survival clause wherein compensation is paid only if the policyholder survives for 30 days after being diagnosed as suffering from a critical illness. In such instances the treatment expenses have to be borne by the patient's family if one dies within the survival period. Most insurers however offer death benefit, which is either the return of premium, or a pre-defined sum assured.

Hospital cash plans often fail on the convenience front in most cases as they offer the benefit only after discharge from the hospital and that too only after the policyholder produces proof of the number of days he/she stayed there. Moreover, the hospital cash benefit has a pre-defined limit in most cases. For instance, many policies, for instance, give this benefit for up to 50 days in a year and up to 250 days during the entire term.

Cost Factor
As a simple rule of thumb, policies returning premium are much more expensive than the others. For instance, Tata AIG's Health Investor charges Rs 45,000 annually for covering 12 critical illnesses for a term of 10 years and a sum assured of Rs 5 lakh for a 30-year-old. In comparison, a pure indemnity policy is much cheaper. The only drawback is that one doesn't get any money back if no claim is made. In money-back health policies one also needs to carefully read the fine print. For instance, Aviva's Health Plus - which covers accidental death, critical illnesses and surgeries, and gives hospital cash benefit - charges a standard premium of Rs 35,000 for all ages for a term of 10 years. However, in a term of 10 years, important benefits like hospital cash and covers for critical illnesses and surgeries are available only for the initial five years. You also need to consider that insurers, regardless of the term, allow the same premium only up to five years after which your premium in all probability will increase, decrease, or remain the same depending on your history.