Are Higher Health Covers Worth Taking?

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Premiums for a Rs 3-3.5 lakh cover hover at around Rs 3,000-4,000 a year for an individual in the age group of 18-35 years. Hence, a regular health insurance policy does not help exhaust the Rs 15,000 deduction limit that section 80 D of the Income Tax Act permits. Also, they do not cover day care expenses unless they are related to treatments for certain critical illnesses. To counter these two drawbacks, some health insurers like Apollo Munich, ICICI Lombard and Max Bupa have come out with plans with higher premiums that extend cover for outpatient, and maternity expenses.

Like regular plans, under these plans, as well, all hospitalization-related expenses are covered, including pre-existing illnesses, after the specified waiting period, generally up to two years, during which claims cannot be made. Unlike the standard mediclaim policies, these covers also have a provision to pay for planned medical expenses or those that do not necessitate 24-hour hospitalization — for instance, dental treatment, pregnancy-related expenses, diagnostic tests and pharmacy bills. After producing the requisite bills and the claim being approved, the insurance company will reimburse the amount spent by you, subject to the sub-limits built into the policy.

However, before buying such a policy, make sure to make a list of exclusions, i.e., the expenses that are not covered, and sub-limits applicable to the ones that are admissible. For instance, Apollo Munich’s Easy Health-Individual plan’s premium variants offer a maternity cover of Rs 15,000-40,000 after a waiting period of six years. Max Bupa on the other hand offers maternity expenses only under its family floater plans — after a two-year waiting period. ICICI Lombard’s Health Advantage Plus plan does not offer a separate cover for maternity expenses. However, any expenses incurred pertaining to ectopic pregnancy, are covered under the policy. In addition, any expenses prior to hospitalization like scans, regular doctor check-ups, tests as prescribed by the doctor can be claimed to the extent of OPD expenses limit. Similarly, you need to take a look at sub-limits, too. The maximum limit on maternity benefits under Max Bupa’s policies ranges from Rs 20,000 to Rs 1,00,000 — Rs 2 lakh and Rs 50 lakh being the corresponding overall covers — depending on the variant chosen. Hence, if maternity benefit offered is a key criterion while taking a call, you need to take these aspects into account. Likewise, if you are keen on claiming OPD expenses, then the companies’ basic plans may not be apt for you, as the cover is provided only under their premium variants. For instance, under ICICI Lombard’s individual plan, an insured in the age group of 19-35 years will have to pay an annual premium of Rs 15,000 for a cover of Rs 3 lakh under which the OPD sum insured will amount to Rs 8,800 per year. [PAGE BREAK]

The question is, whether one should opt for the value added health insurance policies rather than the basic policies. Such policies are definitely worth considering if you want to fully utilize the tax benefits under section 80 D. However, note that such policies will be costlier than the regular policies given that policies offer additional covers like OPD and maternity benefits.

Moreover, reimbursement can be claimed only to the extent of sub-limits. Hence, there are people who believe that instead of shelling out the additional amount, you could consider depositing the same in your bank account and go for a higher health cover and meet OPD expenses out of pocket; a higher cover enabling you to avail of enhanced sub-limits.

Take-home - The average growth in cost of health treatment is increasing at a rate faster than inflation. At these rates, hospital room rental of Rs 2000 of today, in 15 years, would cost Rs 5916. Similarly, an operation that costs Rs 5 lakh today would cost Rs 14.8 lakhs in 15 years. Such escalation requires that your health insurance is planned lest you should erode your retirement corpus in case of medical emergencies. At the same time, remember that the primary purpose of buying a health policy should be to enable you to meet any unexpected illness or accident-related expenses without straining your finances.