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Don't get baffled by the policies that health & life insurers offer. Here's how you can identify the plan best suited for you

Medical costs are ballooning by the day - even a minor surgery can cost you anywhere between . 20,000 and . 50,000. Similarly, a cardiac treatment can set you back by . 5 lakh, depending upon the city and the hospital you choose. Save, invest, do whatever you want - there can be no dispute over the need for mediclaim to offset the impact of rising healthcare costs. Given the plethora of options in the health insurance space, it is difficult to make a rational choice. With life insurance companies entering the health insurance space, customers are spoilt for choice. ET chalks out the differences between traditional mediclaim policies offered by general insurers and the new generation health covers offered by life insurers. Here's a low-down on the key components of a comprehensive mediclaim:

Defined Benefit & Reimbursement Plans:

There are two kinds of medical policies available in India. The first is the indemnity policy, which is the traditional mediclaim policy that general insurers offer. These are largely reimbursement plans, which cover expenses related to hospitalisation. The claims are settled by the insurer either on a cashless basis through a tie-up with hospitals or by reimbursing bills. Then, there are defined benefit plans, offered by life insurers, which include critical illness policies and payment of a lump sum on the diagnosis of any of the named critical illnesses in the policy document. "If the insurance company is stipulated to pay . 5,000 for a certain critical illness, the company will pay . 5,000 irrespective of the size of the claim," says Rahul Aggarwal, CEO, Optima Insurance Brokers. However, critical illnesses such as cancer, stroke, renal failure or major organ transplants are not standardised and may vary from insurer to insurer. However, the insurers will not cover any of these illnesses if they get diagnosed within 90 days from the effective date of the policy.

Difference In Premium:

"The premiums of both versions of health covers are comparable but life insurers still outsource the service of claim settlement to TPAs. Among general insurers, most private sector companies have changed this practice and carry out the claim servicing business within the company itself. In a way, the company becomes directly responsible for claim settlement. Earlier, even when the TPAs carried out the business of claims servicing, the onus was on the insurer to ensure a hasslefree claim settlement for the policyholder," says Sanjay Datta, head, Health Insurance, ICICI Lombard General Insurance.

Tenure Of The Cover:

"The main difference between health covers offered by general insurers and those of life insurers is the tenure of the cover. The mediclaim has to be renewed annually whereas health covers (offered by life insurers are renewable after three years or more, depending upon the choice of insurance and insurance company). The premiums are likely to remain unchanged in the three-year period. If the insurer wants to increase the premium within three years, the insurer has to seek the approval of Insurance Regulatory and Development Authority (Irda). If the insurer wants to increase the premium after three years, it works like a regular mediclaim policy which usually revises premiums on an annual basis," Binay Kumar Agarwala, senior V-P, health business, ICICI Prudential.

Size Matters:

You should look at the annual limit of your policy. According to experts, if you hail from a small- or mid-sized town you should look at a cover of . 2-3 lakh. If you reside in a metro, then you should not look at covers less than . 4-5 lakh.

Look For The Clause On Sub-Limits:

Insurers have introduced sub limits in mediclaim policies to tackle the rise in healthcare costs. The most common sub-limits are room rents, doctors' fees and diagnostics. If you have a sum insured of . 1 lakh and the insurer has capped your room rent at 1-1.5% of the sum insured then your room rent cannot exceed . 1,000. If it exceeds the specified amount, then you have to pay the balance from your pocket. "If there is a sublimit on the room rent or the doctors' fees, the ultimate payout will be much lesser than the sum assured," Datta adds. Similarly, insurers also impose a sub-limit on doctors' fee at 25-30% of the bill amount. Check to see that the policy states the date the policy will begin paying (some have a waiting period before the cover begins) and what is covered or excluded from coverage. Moreover, it always makes sense to have an additional mediclaim even if you are covered under your employer's mediclaim scheme.

Co-Payment Clause:

This refers to the portion of claim that a policyholder agrees to bear, while the insurance company undertakes to chip in with the rest. "Co-payments happen only in certain reimbursement covers to make the insured more responsible for judicious payments. This clause is seen mostly in health covers designed for senior citizens. It is also common in group mediclaim covers offered by employers, which covers the employees and his/her family members. The co-payment clause is applicable mostly to the family members of the employee," Aggarwal adds.

The Pre-Existing Diseases Clause:

There are mediclaim covers which do not cover pre-existing diseases for four years whereas some which do not cover it for three years. Similarly, ensure there is no ambiguity in the renewal clause of the policy. For example, under an individual mediclaim policy, Apollo Munich covers pre-existing diseases after three continuous policy years. The New India Assurance, on the other hand, covers pre-existing diseases only after four years and covers hypertension and diabetes only if you pay extra premium.

The Ideal Choice:

The defined benefit plan could be a handicap for an individual who has signed up for a less sum assured. But it could be a plus for an individual who has signed up for an adequate sum assured. Moreover, you will know how much you will earn from your cover in advance. Similarly your mediclaim could have caps and limits, which can be well augmented by the health cover. But that doesn't imply that a stand alone health cover can substitute a mediclaim in your financial kitty," Aggarwal adds. You can top up your existing mediclaim if you want to increase the sum assured. Indemnity or reimbursement cover should be the ideal base cover for any policyholder as that would come close to the final bill amount of the hospital. But there are various expenses which include commuting to the hospital, buying medicines post hospitalisation and so on, that fall outside the purview of a traditional reimbursement plan. In such cases, you could top up a traditional reimbursement plan with a defined benefit plan to be able to tackle all the medical-related expenses. After all you have the option of claiming a tax benefit of up to . 15,000 under Section 80D.

THE HEALTH PACK

GENERAL INSURERS

* General insurance companies offer indemnity policies or reimbursement health plans

* Mediclaim has to be renewed on an annual basis. The company can increase the premium at renewal

* Look for the clause on sub-limits. The most common sub-limits are room rents, doctors' fees and diagnostics

* Individuals from a small town should go for a cover of 2-3 lakh, and in metros up to 5 lakh

LIFE INSURERS

* Defined benefit plans, mostly offered by by life insurers, pay a lump sum on the diagnosis of any of the named critical illnesses listed in the policy document

* Insurers usually do not cover the specified critical illnesses if they are diagnosed within 90 days from the effective date of the policy

* Premiums are usually revised at renewal, which is usually three years or more

* If the company wants to increase the premium within three years, the insurer has to seek Irda's approval

Source : http://epaper.timesofindia.com/