Life insurers' health plans are not necessary

Indemnity-based covers from general insurers pay hospitalisation charges and are cheaper

Both life and general insurance companies offer health insurance plans. And potential policyholders often don't know where to purchase a health policy from. As a result, while some buy from a health insurer, others buy a life insurer's policy. Add to that, life insurance agents push health plans to individuals. Or, offer a combination of products. Therefore, it becomes difficult to choose from a host of products being thrust into your face.

Experts advise first-time health buyers to stick to a health cover issued by a general insurance company. "An individual should first consider a general insurance company's product and then may be a life insurer's cover," says Deepak Yohannan, chief executive officer (CEO) of MyInsuranceClub. com, an insurance comparison website approved by the Insurance Regulatory and Development Authority of India (Irda).

The basic difference between health covers of general and life insurance companies is that health insurers provide indemnity plans that reimburse hospitalisation costs. On the other hand, life insurance companies mostly offer benefit health plans that pay a fixed amount on diagnosis of a particular disease. Though, a rare few like ICICI Prudential Life Insurance (ICICI Pru Life Health Saver -- a unit-linked health plan) and Bajaj Allianz Life Insurance now offer indemnity health plans.

Says Amarnath Ananthanarayanan, CEO of Bharti AXA General Insurance, "General insurers pay the actual cost incurred on hospitalisation. In comparison, life insurance companies pay a fixed amount either on hospitalisation or on being diagnosed with a particular disease. As a result, with the latter one may or may not be able to recover the entire cost incurred." Plus, you can get cashless cover from a general insurer, which life insurers do not offer. For instance, LIC's Jeevan Arogya gives Rs 1.50 lakh for angioplasty. Experts say this amount may be enough for clearing only one blockage. But most patients undergo angioplasty for multiple blockages. In such cases this policy will not suffice.

Experts say premiums for life insurer-issued health cover is mostly higher than a general insurer's health plan. For instance, a Rs 3-lakh indemnity-based health plan will cost you between Rs 3,000 and Rs 5,000. As against this, a life insurer's benefit plan can charge between Rs 4,000 and Rs 6,500 for a Rs 3-lakh cover. Compared to both these, indemnity based plans from life insurers are even more expensive. A Rs 2-lakh cover can easily cost Rs 10,000-15,000 (ICICI Pru Life Health Saver). A reason for that also is the high commissions life insurers pay their agents (up to 35 per cent) as against general insurers (15 per cent). Other reason could be the investment options attached to many such plans.

Says medimanage.com's Mahavir Chopra that a life insurance company's health cover can be used to supplement a general insurer's health cover. "Benefit products can be used as substitute for loss of income due to ill-health, get deduction for medical treatment but cannot be depended on for life because these won't offer enough to cover complicated health problems or prolonged illnesses," he adds. Even as a supplement, Yohannan prefers a critical illness cover over a life insurer's health cover.

You can't even port a life insurer's health policy. The good part about life insurers' health plans is that these are long-terms plans (3-20 years) and hence their premiums are unlikely to be changed for the policy term. A general insurer can revise premiums once you move from one age bracket to another. Though, Irda may not let that happen easily.