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Why a critical illness policy is more useful

Out-of-pocket expenses currently account for 65% of the overall healthcare spends

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With India being one of the cheapest health insurance markets, it's time to prioritise health insurance.

With the constant rise in the cost of healthcare in India and considering the ever-rising instances of lifestyle diseases, buying health insurance has today become a basic necessity. A health insurance cover provides you with a much-needed financial backup at times of medical emergencies. However, the truth is not many people in our country understand the importance and necessity of a health insurance policy. India is one of the least insured countries across the globe, with a health insurance penetration rate of only about 20%.

As per a recent report by Milliman - a prominent actuarial and consulting firm - only 44% of the 1.35 billion people in India have a health insurance policy. The report further highlighted that in rural India, over 85% of the population is not insured, and around 80% of the urban population that has a health insurance remains underinsured.

Moreover, the healthcare expenditure of India as a percentage of GDP is just 4.7%, which is considerably low in comparison to other countries like the USA which spends about 18% of its GDP on healthcare expenditure. According to the report, of the total expenditure on healthcare in India, over 70% comes from the private sector, while the contribution from the government's end is just 30%. In contrast to this, the federal and state governments in the US contribute over 45% towards total healthcare cost.

The report findings further emphasised on the fact that of all the people covered under a health insurance plan, over 10% are covered by private insurance companies, 26% are covered under the government-run health insurance program, Rashtriya Swasthya Bima Yojana and other popular government schemes while a little over 10% are covered either under ESIS or Central Government Health Scheme (CGHS).

Considering the given facts, we all must make sure that healthcare remains the priority and, especially, for a country like India that has a healthcare system ranked at 112 out of 190 countries. In our country, the expenses on healthcare can easily exceed the average income and savings of a middle-class family. Most of the Indians mainly depend on household income and savings for health care expenses or if need be, borrow money from friends and relatives to pay hospital bills. As a result, thousands of people each year slid into poverty following excessive debts due to health care costs. A comprehensive health insurance policy serves to insure you against any such rare medical emergency.

Fortunately, India is one of the cheapest health insurance markets across the globe offering comprehensive health insurance policies at affordable prices. Moreover, insurers are now even moving beyond mere hospitalisation coverage to more comprehensive policies that apart from covering out-of-the-pocket expenses even incentivize wellness and promote preventive care. Apparently, India has one of the world's highest rates of out-of-pocket spending in health care. The basic cover will now be available through regular health plans as the focus of insurers is developing towards solutions for meeting out-of-pocket expenses like OPD, pharmacy, diagnostics etc. Apparently, out-of-pocket expenses currently account for 65% of the overall healthcare spends.

In India, a substantial proportion of the healthcare is provided by the private sector, however, the public insurers like New India Assurance Co, Oriental Insurance Co, National Insurance Co and United Insurance India also retain almost half of the market share in health insurance. Dominant private insurers include Apollo Munich Health Insurance Company Limited, Star Health, Future Generali India Insurance Company Ltd, and Bajaj Allianz.

A health insurance floater policy of Rs 7-10 lakh is quite sufficient in most parts of the country. However, a regular indemnity policy may not be of much use if the policyholder is diagnosed with a serious ailment. For such cases, a critical illness plan is more useful. A critical illness policy come at higher cost and covers specific ailments. The type of policy to buy should be determined by your family's needs. The number of family members and their age is crucial to identifying a policy.

It is high time to prioritise healthcare as a fundamental public good and bring it on par with the quality education. Healthcare in India must be made affordable and accessible to all, for the overall development of the country.

The writer is chief business officer, life insurance, Policybazaar.com

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