Add-ons for mediclaim

Did you try buying a health insurance policy lately? If you haven’t, let’s look at how complex the process can get. To start with, there are 16 non-life insurance companies that offer health insurance products. Each has 4-6 products catering to different needs. Yes, you could narrow this list down to a few companies with a standard policy and then compare the premiums. But your job is still far from over.

Of lately, even life insurance companies – around 20 of them – have started offering health-related policies. And these products are very different from the regular ‘Mediclaim’ offered by non-life insurance companies. Confused? You ought to be. But let’s demystify this product.

Health insurance policies have traditionally been indemnity products. Simply put, the insurer compensated expenses incurred for a treatment within the agreed limit (sum insured). For instance, if you have a sum insured for Rs 5 lakh and, on hospitalisation, your treatment costs you Rs 2 lakh, the insurer will pay you this amount based on the bills and other evidence produced.

But now life insurance companies have started offering defined-benefit products. In this, the policyholder is paid a predefined amount for the treatment. In most cases, this is paid on a per-day basis. Some of these companies are targeting people who are already covered by a group policy from their employers.

“These can also take care of the incidental expenses incurred during hospitalisation, such as transportation,” said Manik Nangia, head of product management at Max New York Life Insurance.

Let’s look at one such plan: LifeLine MediCash Plus, from Max New York Life Insurance (MNYL). The company claims to have sold 1.25 lakh health-related policies in past 11 months. This policy does not have a sum assured, like other indemnity products. For this policy, MNYL has specified a premium for different ages. 

This is treated as a unit. If one requires higher coverage, the person can buy multiple units (up to 5). The compensation part is divided into four areas: Daily hospital charges, daily intensive care unit (ICU) fees, recuperating charges and surgical expenses. Recuperating expense is provided only if there has been consecutive and continuous period of hospitalisation for 7 days or more, and the policyholder was admitted to ICU.

If you have taken one unit, the company will pay you on hospitalisation Rs 1,000 per day as hospitalisation charges, and Rs 2,000 for ICU. Apart from this, a lump sum Rs 3,000 is paid as recuperation cost and a surgical cash of Rs 50,000.

Surgical compensation depend on the nature of surgery. MNYL has categorised surgeries into four definitions: Minor, intermediate, major and supra major. The compensation depends on the category of the surgery. For supra major, the compensation is 100 per cent of the specified surgical amount, no matter what expenses are actually incurred.

Due to pre-defined expenses, such policies cannot cover actual medical costs. Current defined-benefit products also miss the mark in other areas.

Unlike regular mediclaim, a person insured under a defined-benefit policy does not need to renew it annually. The term of this product can vary from 3 years to 10 years. The premiums are also fixed. In a 10-year term, the premium can be revised after 5 years. The premium for a 40-year-old, who takes one unit, is Rs 2,807 in MNYL’s MediCash Plus. While National Insurance offers a cover of Rs 2 lakh for Rs Rs 3,488. For the same sum assured, HDFC Standard Life Insurance charges Rs 4,992 as premium under its SurgiCare Plan

The waiting period is much longer in defined-benefit products. MNYL’s LifeLine MediCash Plus has a waiting period of 180 days from the policy commencement date, unless the policholder meets with an accident. In case of indemnity insurance (traditional mediclaims), it is only 30 days.

Most defined-benefit products do not pay benefits for the first 24-48 hours of hospitalisation. This further reduces the compensation.

Many non-life insurance companies allow people to take a mediclaim up to 65 years of age. Public sector insurance companies, as well as some private ones have special schemes for senior citizens. Most of the defined-benefit plans have an entry age till 55 years only. The renewal, too, is up to 65 years in most defined-benefit policies. On the other hand, indemnity policies allow renewals up to 75-80 years.

Defined-benefit policies do not cover pre-existing diseases, whereas the traditional mediclaim policy has an exclusion period of 4 years.

Most experts feel such defined-benefit policies are well-suited only as an add-on with the traditional mediclaim as the primary policy.

Gaurav Mashruwala, a certified financial planner said: “These policies are restrictive as they compensate for defined illnesses and surgeries.”