'Our health insurance policies give us moral support'

"Wish I had health insurance” — that’s probably the first thought that crosses the mind of someone confronted with a hefty hospital bill. “Less than 1 per cent of medical expenses that Indians incur goes into insurance,” says Karan Chopra of ICICI Lombard, which offers medical insurance. “It’s rarely bought, even by those who really need it.”

The opening up of the general insurance sector has seen a substantial increase in the number of people getting themselves medically insured, but this remains an area in plenty of need for awareness.

Why insure?

A health insurance policy, popularly known as mediclaim in India, helps individuals cover their medical expenses — diagnosis, hospital stay, doctors’ fees, treatment costs, etc — incurred during hospitalisation for an injury or illness. The policy also covers expenses incurred before and after being hospitalised.

“My husband and I got medical insurance a few years ago,” says Anuradha Srinivasan, 56, a retired teacher based in Chennai. “We were suffering from small problems and illnesses, and realised we should secure ourselves to the extent we could. Our health insurance policies give us moral support; we know the money will be there if we need it.”

Your options

The typical health policy covers medical expenses sustained 60 days prior to, and 90 days after, hospitalisation. In most policies, expenses on hospitalisation are reimbursed only if an individual has spent at least 24 hours in a medical facility. 

The maximum cover — sum assured, in technical terms — that insurance companies offer for any single course of treatment is Rs5 lakh. The policy tenure in most cases is one year, and this has to be renewed annually. Some companies offer a two-year tenure with the premiums for both years staying the same. 

Unless you have had a bad experience with the insurance company, it makes sense to continue with the policy you have, because for every claim-free year you get through you can avail a bonus of 5 per cent on the sum assured. So if an individual has been insured for Rs3 lakh during the first year and makes no claims in that year, his cover increases by Rs15,000 for the second year.

“When I underwent heart surgery this year, I received Rs30,000 more than what my cover was, as a bonus for my previous two claim-free years,” says R Ramachandran, who works for a private company in Mumbai. “This was a big help.”

Innovative schemes

Insurance companies have, of late, launched innovative products to attract consumers. The most useful of these is the family cover.

If a husband and a wife opt for two separate insurance covers of Rs2 lakh each, they would pay separate premiums for the two plans and their cover would be limited to a maximum of Rs2 lakh each. Now, if the wife takes ill and the hospital bill is Rs2.5 lakh, the insurance company will pay a maximum of Rs2 lakh. The extra Rs50,000 will have to come from the couple’s own resources. Given this reality, it would have made more sense for the couple to have a family cover of Rs4 lakh for the year, in which case the insurance company would have picked up the entire tab of Rs2.5 lakh. The remaining money is available to the couple for the rest of the year. However, in such cases, the premiums are higher.

Another innovation is cashless mediclaim, in which the insurance company issues a health card to the customer, which he or she can use to get admitted to any hospital the company has an arrangement with. The hospital then bills the insurance company, which pays the hospital directly.

“The cashless segment is highly popular. Nearly 70 per cent of our claims are through cashless settlements,”   says Shreeraj Deshpande of Bajaj Allianz General Insurance.
One company also offers e-opinion — a plan which provides a second opinion from specialised doctors of reputed US hospitals.

Critical-illness rider

If an individual chooses to take a policy with a ‘critical illness’ rider, he/she or she gets the amount of the critical illness cover irrespective of what he spends on treating the disease. This relates to conditions such as cancer, coronary artery surgery, renal failure (failure of both kidneys), multiple sclerosis and major organ transplants.

However, if the policy-holder dies within 30 days of the illness being diagnosed, he or she does not get the over-the-limit cost. Furthermore, the illness should not be diagnosed within 90 days of taking the policy.

Tax benefits

A health insurance cover allows individuals to get a tax deduction as well. Up to Rs10,000 can be deducted for payments made for medical insurance premiums; for senior citizens the limit is Rs15,000. This is besides the Rs1 lakh deduction allowed under Section 80 C.

So take note and take up a policy. As Deshpande says, “Health insurance is bound to grow and will cover a wider range of health risks.”

Watch out for…

The fine print

• Hospital expenses are usually reimbursed only if an individual spends at least 24 hours in the hospital.
• All diseases existing at the time of taking the policy do not get covered. They are covered only after four years of signing on for the policy. 
• Any disease contracted during the first 30 days of the policy’s commencement is not covered.
• Hernia, piles, cataract and sinusitis are only covered after a two-year waiting period.

Other issues

• Companies shy away from insuring the elderly as they are more likely to make a claim. A person can continue with a long-running policy into old age, but it is difficult for a new entrant to get a policy at an older age. 
• State-owned insurance companies provide a cover of as little as Rs15,000. But they are thinking about discontinuing these.
• Insurance premiums have risen by almost 25 per cent in the past year. This is because of rising healthcare costs and high claims-to-premium ratios. 
• Companies tend to set an average premium for a particular age group. This appeals to people who are not healthy and are, hence, likely to make a claim. What this means in the end is that companies end up selling insurance to people who are confident of using it. 
• There have been cases where people with cashless medical insurance have had to pay money at the hospital themselves because the company (or its proxy) did not respond in time.

With inputs from Aditi Seshadri