With increase in lifestyle based ailments, and skyrocketing healthcare inflation in India, no one can deny the importance of buying an independent Health Insurance as a part of a sound financial plan.
Working for a specialist health insurance services company in India (Medimanage.com), we are witnessing increased awareness, but we still observe that a lot of unanswered questions leave customers in an endless quandary, and result in no decision on health insurance.
Answering these questions is a daily job for a service provider like us, so here, I have tried to consolidate the top questions which impede the purchase of health insurance for most of us, and have answered them in the simplest manner.
Buy health insurance now, or buy later?
Recently, I read a comment on a blog, which talked of the right age to buy health insurance. “Should I buy in early 30s, or late 30s or early 40s?”
My answer to this was simple “buy insurance before you need it“.
Talk to any good doctor, and he will tell you how the medical community is seeing younger and younger patients in India falling to disease trap of hypertension, diabetes, cholesterol, and worse, cardiac ailments. With convenience being the buzzword, and technology taking over our lives, our lifestyles have increasingly become sedentary, which in turn has added to the peril of disease.
While you can thwart diseases by following a balanced healthy lifestyle, you would agree that unfortunately, no one could foretell when you or your family’s health can take a beating, say due to a rare accident or a hereditary disease.
In a lifetime, it has always proven to be way cheaper to buy health insurance than the price of the risk of not having one. We have seen so many cases where once a family member suffers from any ailment, the odds of getting covered under the best Mediclaim policies constrict. In case of a chronic ailment, most insurers even deny a cover.
Moreover, there are 2 more benefits of buying now:
- With the waiting periods for specified ailments, it takes minimum 2 years for one to enjoy complete benefits under the policy.
- You enjoy a “No Claim Bonus” (additional sum insured) every year for the number of years you don’t claim. Your cover could increase by 50 to 100% depending on the product you buy.
Medical insurance through employer or buy independent mediclaim?
“I already have a basic cover from my employer, why do I need to spend when I am already covered?” – goes another question.
Please understand that the health cover YOU buy is YOUR OWN for life. Your employer owns the employer-backed group cover, not you. Hence, it is clearly a short-term cover till you are an employee of that company. In all cases, it is the employer who decides the cover, and the terms and conditions.
What’s more, a recent report on employee benefits all over the media suggested some glaring realities of the future of employee benefit insurance, one of which is that premiums charged per employee under group health insurance have increased by 38% in the last 2 years.
These are the signs of times to come. With the economic down turn, businesses are under huge pressures on profitability, and are using all means to curtail costs. Health Insurance is one area, where 90% of employers have confirmed to curtail benefits going forward.
In the short-term, Company Mediclaim could cover pre-existing ailments or waive waiting periods, but it is not sensible to rely and depend only on your employers cover, unless you plan to retire from the company, and manage with what is given or taken back by your employer.
Family floater or individual medical insurance cover?
This is again a repeatedly asked question. Individual policies provide separate insulated covers to each individual, while family floaters prove to be way more cost-effective.
I am in more favour of a large family floater, as it provides a larger float to the family members and is cost effective.
So if you feel a Rs. 3 Lakh individual plan would be good enough individually, and you have a family of 4, you should go for a Rs. 10 Lakh cover, which in most cases would prove more optimal in the long run.
The biggest benefit of a floater is the ability of one member who may get badly ill to use the entire floating sum insured. In a government policy, one large Mediclaim cover also gives you better room rent limit if needed.
Third Party Administrator (TPA) or in-house claims processing?
Frankly, it doesn’t matter. Having worked with both kinds of systems, I can say that both can be equally lousy! Hence, it would be very difficult to generalize that a company with an in-house TPA is better.
What you need to do is ensure you get enough information about the TPA and its service from the representative or intermediary you are buying the insurance from. In nearly all cases, it depends on how experienced, efficient and diligent your advisor or service provider where you bought your policy from is.
Ensure that the advisor from whom you buy the policy assures you that he / she will be able to provide good services through this TPA. This is the maximum you can do here.
Government mediclaim or private health insurance companies?
Again, a classic question. PSU Companies have the sovereign backing of the Government, and hence some customers find them to be more reliable in the long run. On the other hand, there is a general perception, that Private insurers being “for-profit” organizations may become tightfisted when it comes to making payments against claims.
In reality, none of them are really perfect. In my experience, government companies are bureaucratic and lethargic, but are more judgmental before rejecting or reconsidering a rejected proposal or a claim.
On the other hand, private companies are more responsive, but many are very rigid when it comes to an adverse health proposal or a claim under dispute.
There are good government companies, and bad private players, and vice-versa. There is no generalization possible. Go for the best product, with good claims experience reviews.
Feature packed, all-covered policy or basic policy?
What are we talking about? Maternity covered, OPD costs covered, cost of spectacles, medical check-ups covered, vaccinations covered, and many more.
The more health insurance companies enter India, the more you will see differentiation and complexities. After all, every company needs to offer something “different” for its agent force and tele-marketers to market its products.
You need to see through all this, and look at what is the core problem you are solving here. The core problem is the large hospital bills, which are becoming increasingly unaffordable, and could kill all your financial plans. Any other day-to-day medical costs should be affordable, and should be a part of your regular costs. Remember, any expense that you can afford to pay while continuing to live a normal life does not need Insurance.
What is the optimum sum insured?
There is no magic formula to decide the optimum sum insured. It depends on your needs. Your cover would depend on your family structure, your preferences, etc.
Here are some questions which could help you decide whether you need a moderate or a high cover.
- Where do your family members live, and where would you be most likely to claim? Metro Cities, smaller cities or towns?
- Number of members in your family. Higher the members, higher is the cover required.
- Age group of the members. If you have many members in the 40+ age group, you need a higher cover.
- Type of hospital and type of room you would opt for. If you tend to choose luxurious hospitals and rooms, you will again need higher coverage.
Finally, remember that you need to calculate the optimum sum insured for years when you would be 50+, that is, when you would need health insurance the most. With healthcare inflation between 18-25%, a Rs. 10 Lakh cover would be optimum to cover a family of 4 with the eldest in the early 40s.
It is becoming increasingly difficult to take a low cover now and upgrade later. As once your age progresses, your risk in the eyes of the insurance company increases. Now, if there is an ailment that any member suffers, or if there is a claim, your chances of an upgrade are almost zero.
Ensure you buy a good cover in the beginning itself.
One policy for the family or split?
As mentioned earlier, we generally recommend floater policies. But, if there is any specific member who is in the high-risk category (mostly parents, people above 50 years of age, members with pre-existing ailments, etc.), we recommend splitting the cover into multiple policies – separate policies for the high risk with an optimum cover for the remaining expected years of life, and a separate policy for the young and healthy members of the family.
This is done with the aim of avoiding the high-risk member eating into the cover of the remaining members of the family. This splitting has other benefits too, like the claims loading is not applied to all members when there is a claim in the policy.
Buy direct or through an agent?
Health Insurance is hugely service oriented. It is not like a term insurance or car insurance where you can make renewal payments online and easily get your claims settled without any expert help.
In health insurance, there are yearly renewals, claims could have a lot of unavoidable back n forth, there are records that need to be maintained for continuity, etc. To top all this, due to huge transformation being witnessed in the health insurance sector, there are regular changes witnessed in the health insurance products and procedures in India where you could need an experienced hand to help you tread past this.
What’s more, the experience of people buying directly from a Private or a PSU company has not been as desired. In case of private companies, people generally have to suffer with the canned conversations of tele-support call centres, whereas in the PSUs, red taped babus will face you.
Since you don’t pay a penny extra, having an experienced advisor or agent in your side, could help you with a single point of advise and service.
Here’s what you should look for in an Advisor:
- He should offer unbiased advise across health insurance companies.
- He should have enough experience managing health insurance claims.
- Preferably, health insurance should be his core service, and not a part time money earner.
More questions? Please hit the comments section!
If you have more questions, please ask it as a comment below, and I would be happy to answer. Alternatively, I am also available at the email address: expert@medimanage.com.
This is a guest article written by Mahavir Chopra, who is a chartered accountant by qualification and a specialist in Health Insurance. He heads – eBusiness & Retail at Medimanage.com, India’s first Specialized Health Insurance Broking Company, servicing corporates and individuals.
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