Health insurance is an important part of the financial planning process. If you don’t have a health cover, you are completely exposed to the possibility of paying large medical bills in case you or a family member is hospitalised. Sometimes, these medical bills are so large, they can wipe out a person’s life savings and investments.
Normally health insurance covers hospitalisation expenses for a patient. Some insurance policies also pay for Out Patient Department (OPD) treatment.
What is an OPD health insurance cover?
OPD health insurance is an additional cover provided by the insurer who charges extra premium for the enhanced facility. It includes charges incurred other than the hospitalization expenses which are normally covered under the regular health policy.
The following are some of the key features of the OPD cover:
-It covers minor hospital non-hospitalization expenses for medicine, check-up etc.
-It suits persons or families whose pharmacy expenses are either fixed or have to be incurred regularly.
-The extra premium paid for the OPD cover is also eligible for the tax deduction under Sec 80D within the sectional limit.
-The total amount that can be covered under the OPD health cover is normally lower than the extra premium paid for it.
-It can be used to cover expenses such as X-ray, blood check, doctor’s fees, medicine bills, day care charges etc.
-Some health insurance companies provide discounts on the subsequent year’s premium if no OPD claim has been made in the closing year.
Is it necessary to take the OPD cover?
People who need regular doctor consultations and need to buy medicine frequently – especially diabetics, asthmatics, etc.—can take an OPD cover. Though the benefit is not significant, the extra premium paid for taking the OPD cover would be eligible for tax deduction under Sec 80D under the prescribed limit.
You can take the cover if you bear regular OPD expenses which you couldn’t avoid anyway and if you have not already exhausted the tax deduction under Sec 80D. Let’s understand this with the help of following example.
Suppose you have a base health cover of Rs 5 lakh (family floater) for which you have to pay a premium of Rs 10,000. Now you decided to take an OPD cover for Rs 14,000, and you paid an extra premium of Rs 16,000. The limitation of the OPD claim would be Rs 14,000. The main benefit of paying the OPD premium would come as a tax benefit.
Let’s understand this with the example of following table which compares the two scenarios of having the OPD cover versus not having it.
As the illustration shows, an OPD cover helps people who incur fixed or regular medical expenses. However, the total benefit with tax adjustment won’t be significant. If your total yearly OPD bill is uncertain or lower than the total benefit allowed under the OPD cover, it may be advisable to not buy this cover.
It may be better to keep aside a fixed amount every month in your bank’s flexi-recurring deposit account or high interest paying savings account to cover the OPD expenses. Even you end up not having medical expenses, your fund is intact and its value would have grown.
The author is CEO, BankBazaar.com.