After the “How am I doing financially?” question, the second most often asked money question is about medical insurance. Which company to buy from, how much, floater or individual, rider or not, do I need it if my office and that of my spouse gives medical cover and so on—the breadth of the questions show the depth of the confusion about this insurance cover. The rising cost of corporate hospitals and a similar rise in lifestyle-linked diseases have made many of us realize that the risk of a medical procedure that needs a doctor to cut us open is more likely the risk of losing your life.
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Actually, it is easier to buy a life cover, if you cut the noise of bundling investment with insurance, than a medical cover. New entrants into the industry have made the choice set large and one error in choosing or filling the proposal can make the policy useless. The first question we struggle with once we realize that having a medical cover is a good idea is: how much cover is enough? I like to use an analogy an uncle once gave me when I stressed about a new influenza vaccine that one doctor was trying to nudge me towards. He said: you have to decide how unsafe you feel on the road. Is it worth paying for a helmet, a better car with an airbag, a good driver or do you want to travel in an armoured truck? Other than the mandatory vaccines, your vaccination needs simply depend on your paranoia level. I chose not to take the vaccine. I’d look at the how-much question in a similar manner. We can buy a Rs 20 lakh medical insurance cover because we may get hit by a rare disease that needs months in the hospital. Or we buy something that has higher odds of taking place—a broken leg, an eating binge that leads to gastric distress and a drip, an accident that needs hospital intervention, dengue or some such event—and deal with the one-in-a-million chance disease as it occurs by dipping into our savings to finance it. It is sensible to build a cover around the cost of some of the most common reasons people get admitted to a hospital. A rough rule of thumb is: for those already covered by the workplace, an individual cover of Rs 1 lakh each for you, spouse and kids is good. If not, hike the cover to Rs 2 lakh and then buy a family floater for Rs 5 lakh.
Who to buy from? Public sector or private sector is the biggest question that confronts people. If the private sector is known for faster service, there is a trust factor that still rides the state-run name in the financial sector. Unless you have an agent who knows the innards of the public sector world, go with a private sector company and one that does not rely on third-party agents but has its own servicing set up. Stand-alone health companies are increasingly winning the race in terms of products, facilities, claims and services.
The next point of confusion is usually around price. Should just the cheapest premium be the deciding factor? No. You may get induced by a sharp-selling, price-dropping agent into buying a 30% cheaper policy, but may find yourself holding a policy that is no good—it may make you pay the first 20% of the cost, it may be renewable only till age 65, it may have a limited list of diseases it covers and so on. Choose on features rather than the price alone. Check if the policy is renewable lifelong or not. Check if the full cost of a hospital visit will be compensated. Check if there are sub-limits to the policy—or costs fixed on specific procedures that may get you to pay up yourself. Does it allow day-care procedures (such as a cataract or a broken arm that does not need a 24-hour hospital stay) to be covered? A story on these pages ranked companies according to such features and prices: http://bit.ly/lEaCf0
And most importantly, please do not (repeat: not) hide any illness or medical condition while filling the proposal form. The form is a like a legal contract and if you fudge it, no matter what the agent tells you, and at the time of a claim are found to have lied—the company can refuse to pay. It is early days for many new health insurance companies and the informal word out is to be very careful in claims refusal, but as the industry matures, this stand will harden. So please don’t lie about that sugar or blood pressure issue when you fill the form. It will take one test to figure out how bad and old the problem is.
Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, and can be reached at firstname.lastname@example.org