BackHow to build your health insurance portfolio
Given this dual benefit of financial protection and tax saving, health insurance is a must-have. Here's how to make the best of it
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Many tax payers who have exhausted their section 80C investments don’t realise that there are other expenses, too, that get tax breaks. Among them is expenses towards healthcare—specifically health insurance premium, which comes under section 80D. You can use this to claim further tax deductions. “For health insurance of your family and parents who are senior citizens, the total deductions are up to 55,000," said Mukesh Kumar, executive director, HDFC ERGO General Insurance Co. Ltd. Given this dual benefit of financial protection and tax saving, health insurance is a must-have. Here’s how to make the best of it.
Start early
It is imperative that you be covered by health insurance as soon as you begin earning. Start with a basic cover and step it up as you go along. “One can increase the coverage gradually over time, keeping pace with medical inflation and the size of the family. The advantage of starting early is that while you are secured, your premium is low," said Kumar. It is best to have a plan in place for increasing your health insurance.
“We suggest three important parameters while building a health insurance portfolio. One is life stage planning where at every stage of life, the requirement for health insurance will change. Second is the number of dependants, and the third would be current state of health and family medical history, which might include critical illnesses," said Dinesh Rohira, founder and chief executive officer, 5nance.com, a money management portal.
Go beyond the basic
Most companies today provide health cover to their employees and many people make the mistake of being satisfied with that. “This cover may not be enough for all family members. For instance, parents may not be covered," said Sanjay Datta, chief-underwriting, claims and reinsurance, ICICI Lombard General Insurance Ltd. Even if everyone is covered, what if you were to change jobs? “Any gap during change of employment could spell trouble," said V. Jagannathan, chairman and managing director, Star Health and Allied Insurance Co. Ltd. So ensure that you have adequate cover by buying your own health insurance policy as well. One can also buy a top–up cover to enhance the existing coverage limit. Top-up is a plan where hospitalisation would be covered after a certain threshold limit, until which you have to bear the expenses.
Since insurance premiums increase as you age, top-ups could be a way to ensure that the premiums don’t become too expensive. You can go for aggregate top-up plans that take into account the total hospitalisation cost for calculating the threshold limit. “Choose a comprehensive health insurance plan that provides out-patient and wellness-preventive care benefits," said Datta. You could go for individual health plans for each member or a family floater plan depending on your needs.
Make sure you choose the right sum assured. “An individual in the age group of 25-35 years should be covered for at least 3-5 lakh, which is equivalent to the cost of a coronary bypass surgery at a good hospital. For a 35-45-year-old individual with a family of four members, a family floater of 10-15 lakh would be recommended. Senior citizens would need at least 10 lakh," said Kumar.
Consider points such as pre-existing illnesses and income earners in the household when deciding the sum assured.
Points to note
Always look for exclusions (these indicate medical conditions that might not be covered by the policy). “There are certain medical conditions that are not covered under a standard health insurance policy. It is advisable to read through the list," said Kumar. It is also important to look at network hospitals. Insurers tie up with hospitals and nursing homes across the country, which are called network hospitals. In a cashless claim, the insured can make a claim without paying any cash up front, which is possible only at an insurer’s network hospitals. See if your neighbourhood hospital is in the insurer’s network. Also, don’t forget to take into account the waiting period (time taken for a policy to come into effect) and out-of-pocket expenses (which the insurance company will not bear). “You should also take into consideration any deductible amount to buy higher covers at affordable prices," said Datta. Deductible is the amount (limit) you need to pay before the insurance company starts paying your expenses under the policy (same as threshold limit under top-up).
According to a report by Aon Hewitt (provides human capital and management consulting), 2015 Global Medical Trend Report, the global average medical trend rate (or medical inflation) for 2014 was 10.34%; in India it was 12%. The report also said that in 2015, it expected this number to increase to 13% in India. This is confirmed by the fact that the claim severity percentages for all diseases have been increasing, according to Insurance Information Bureau of India. So, do review your health insurance at least once in two years (you can also refer to Mint Mediclaim Ratings; https://www.livemint.com/mintmediratings ). And don’t forget to make use of the tax benefit available on the premium.
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