Combine a robust base health plan with a super top-up, critical illness cover and a dedicated medical corpus to protect household finances from soaring treatment costs.
Key Points
- Employer health insurance may be inadequate, especially when serious illnesses such as cancer require treatment costing several times more.
- Experts recommend at least Rs 50 lakh base health cover, factoring in medical inflation and rising treatment costs.
- A super topup can provide substantial additional protection at relatively low cost after the policyholder meets the deductible.
- Critical illness insurance provides a lumpsum payout that can help replace lost household income during prolonged treatment.
- A separate medical corpus can cover expenses excluded by insurance, including waiting periods, sub-limits, consumables and post-treatment care.
AstraZeneca Pharma India recently purchased a group cancer care policy over and above its existing group health insurance policy for employees, according to a media report.
Some companies also offer group critical illness plans. Most companies in India, however, only provide group medical insurance of around Rs 3 lakh to Rs 5 lakh, while treating a dreaded disease such as cancer can cost several times more.
The majority of employers do not offer a topup cover or a critical illness cover.
"An employer cover may be inadequate. It also ends when the employee changes jobs or retires," says Arun Ramamurthy, cofounder, Staywell Health.
Employees must, therefore, build their own insurance portfolios.
Exorbitant costs
Cancer, heart ailments and organ transplants can devastate household finances.
"Several cancer claims we witnessed in recent times ranged from Rs 50 lakh to Rs 75 lakh in a year. The cost of treating cancer is rising, partly because more sophisticated drugs and treatments are being deployed," says Kapil Mehta, cofounder, SecureNow Insurance Broker.
Liver and lung transplants can cost Rs 30 lakh to Rs 50 lakh.
Buy adequate base plan
Buy a base health cover that is adequate for the next five years. Purchase a high sum insured early, since increasing it may become difficult if one develops an ailment.
"The cover should factor in medical inflation of 14-16 per cent," says Mehta. He suggests starting with at least Rs 50 lakh.
Add a super topup
Experts suggest combining an adequate base cover with a super topup, which also covers hospitalisation expenses.
"This structure can provide a high sum insured without requiring a large outlay," says Mehta.
A super topup pays after the policyholder meets the deductible, typically through the base policy. An individual could combine a Rs 20 lakh base cover with a Rs 30 lakh or Rs 80 lakh super topup.
"For a healthy 45 year old with Rs 20 lakh of base cover, an Rs 80 lakh super topup would cost roughly Rs 8,000 to Rs 15,000 a year," says Ramamurthy.
Buy before health issues develop.
"Ensure that the deductible matches the base policy. Check the waiting periods, exclusions and the insurer's claim-settlement record," says Ramamurthy.
Buy critical illness cover next
Buy a critical illness plan only after purchasing sufficient base health insurance and a super topup. The first two are indemnity covers, while a critical illness policy pays a lumpsum upon diagnosis of a covered illness.
"Critical illness cover should supplement comprehensive health insurance rather than replace it," says Siddharth Singhal, head of health insurance, Policybazaar.
A dreaded disease can affect household income for 12-18 months. Another earning member may have to reduce their work hours to provide care.
"The lumpsum payout can reduce the financial burden created by a lower household income," says Milind Tayde, head -- employee benefits, Anand Rathi Insurance Brokers.
Policyholders can use the payout without restrictions.
"It can be used for outpatient care, diagnostics, chemotherapy, heightened nutritional needs and physiotherapy," says Tayde.
The minimum sum insured should be Rs 10 lakh, though customers may choose Rs 50 lakh or more.
"The cover should meet monthly recurring expenses for two to three years. It should also account for outstanding loans and cost components that health insurance claims do not pay," says Tayde.
Check the lumpsum amount payable. "Prefer a policy with a longer list of covered critical illnesses," says Singhal.
Also understand the definitions and claim triggers. "Some policies cover more than 40 illnesses but impose severity conditions that make claim payment almost impossible," says Tayde.
Also check the survival period -- the minimum time the policyholder must survive after diagnosis for the claim to become payable.
"A typical survival period is 15 days. Some policies offer seven days. A shorter survival period is preferable but may cost more," says Singhal.
Build a medical corpus
A health corpus can meet expenses excluded because of pre-existing-disease waiting periods.
"It can also meet costs arising from sub-limits, consumables and recurring post-treatment care," says Abhishek Kumar, Sebi-registered investment advisor and founder, SahajMoney.com.
He suggests a healthcare corpus of around Rs 5 lakh to Rs 10 lakh, depending on medical history and insurance limits.
The money should be kept in liquid, low-risk instruments for easy access during planned procedures or sudden medical emergencies.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Aslam Hunani/Rediff
