Senior citizen insurance benefits isn't enough

Those below 40 might find it tough to exhaust the Rs 25,000 medical insurance limit; tax benefits for senior citizens could've been more

Senior citizens should be reasonably happy with finance minister Arun Jaitley because the premium cost for medical insurance just about matches tax benefits at Rs 30,000 under Section 80D. For example, for a 60-year-old, the premium for an individual plan with sum assured of Rs 5 lakh would be Rs 15,000. But it would go up with age. For 65-year and 75-year olds, the same cover premiums would be Rs 22,000 and Rs 41,000. The premium for a senior citizen and his/her spouse will be Rs 33,000 for cover of Rs 5 lakh. The premium for special covers such as a diabetes cover can be as high as Rs 50,000.

The problem lies with the low sum assured of only Rs 5 lakh. If they want more cover, the premium would be much higher. “In cities a minimum of Rs 5 lakh cover is required. Those who want better care facilities such as single room or deluxe rooms, a higher cover will be required,” said Nayan Shah, managing director, Paramount Health Services. However, insurance brokers say that many insurance companies do not have policies that provide cover of Rs 5 lakh for people above the age of 60.

For people below 60 years, the Budget provision of Rs 25,000 for medical insurance is sufficient. The premium for a family floater of Rs 5 lakh for two adults and two children for someone who is between 46 and 50 years will be about Rs 15,000. For an individual plan in the same age group, the premium is about Rs 10,000. The premium for a family floater of Rs 10 lakh for two adults and two children for someone who is between 46 and 50 years of age will be about Rs 26,000.

Will the higher limit really prove beneficial to everyone? According to experts, the new limit will be useful as medical inflation is rising by 30-40 per cent every year and insurance cost will also rise, going forward. Certified financial planner Malhar Majumdar, however, believes the increase in medical insurance limit will not be of much help to those below 40 years of age.

For instance, a regular Rs 10-lakh indemnity plan will cost around Rs 10,000 for a 30-year-old. To exhaust the limit, one would have to buy top-up covers for critical illnesses and hospital cash benefit. For a critical illness add-on, the individual will have to shell out about Rs 3,000-4,000 more, while covers for out-patient department or day-care procedures might set one back by another Rs 2,000-3,000. Even with these add-ons, the total premium paid can only be upped to about Rs 16,000.

One way a 30-year-old can meet the limit is if he buys a family floater plan of Rs 5 lakh, which will set him back by about Rs 13,000. Add another super top up for Rs 10 lakh sum assured at about Rs 6,000 and critical illness cover of Rs 10 lakh at about Rs 8,000. “The new limit will give an incentive to opt for higher cover and widen coverage to include more family members,” said Sanjay Datta, chief underwriting & claims, ICICI Lombard General Insurance.