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More and more people, now, realise the need for medical insurance. They have either experienced sudden, unmanageable medical expenses or have known someone in a similar situation. There are still many who rely on employer provided cover or family floater.

With soaring medical costs, an individual health policy with adequate cover is necessary.

COST

A recent survey by global consultancy firm, Towers Watson, has indicated a steady rise of 15-25 per cent in health cover premiums. Unlike life insurance, there is no ways to assess the need for  medical cover.

Looking at the high medical costs, we suggest a minimum of  Rs. 5 lakh cover per adult and Rs. 3 lakh per child. Most companies these days cover upto Rs. 10 lakh. The differential between a Rs. 5 lakh cover and a Rs. 10 lakh one is not much.

For instance, 42-year old Nandan, his wife, Neelam (38) and two kids, aged nine and seven years, are fit.

A Rs. 5 lakh cover for the adults and Rs. 3 lakh for each kid would see a premium of Rs. 22,500 a year.

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If Nandan covers his wife and himself for Rs. 10 lakh each and his kids for Rs. 5 lakh each, the premium will be Rs. 31,000 per annum. They need to pay Rs. 8,500 more, to double the cover. A good option, as medical emergency can arise anytime.

BUDGET SPOILER

This Budget, the Finance Minister has brought medical treatment under the service tax net. All non-government hospitals with 25 or more beds, central air conditioning, partially or fully will be charged service tax. And this is most likely to get reflected in patients' bill.

There is, however, an abatement of 50 per cent, which means 5.15 per cent will be levied instead of 10.30 per cent. Also, all diagnostic tests will have to pay 5.15 per cent service tax.

Obviously, this is a negative step. This may push up healthcare related expenses for all of us.

Increased costs due to service tax, will automatically reduces the insurance cover to the extent of the tax.

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PORTABILITY

This move by the Insurance regulatory and Development Authority, allows a consumer to move from one health insurer to another and carry over benefits like waiting periods for pre-existing diseases. This will ensure policyholders cannot be held captive and better quality services. This will be effective from from July 1, 2011.

POLICY CONSTRAINTS

Employer-provided health cover is good for its coverage of pre-existing illnesses  and child birth, related expenses immediately, cover for parents (on a co-payment basis, in many cases), and importantly, at negligible cost until you want extra cover. For that you need to pay a residual premium.

The limitation here is, it is valid only as long as the job. These are rarely portable. Not all companies may provide health cover. The cover also needs to be sufficient.

Many opt for family floater plans, as they are cheaper. There is no limit to which the sum assured can be used by one family member. The problem arises if more than one person fall ill together. That time, if one person has higher bills, the other member suffers due to lower cover under the same policy.

The writer is a certified financial planner