Health insurance should be among the first items to be included as part of a financial plan. It provides protection against expenses incurred for various health/medical reasons. For example, if a person is hospitalised and has a health cover, his hospitalisation expenses will be borne by the insurance company to the extent of the sum assured. The health insurance plan is a contract between the insurer (insurance company) and the insured (individual) wherein the insured pays the premium and the insurer takes care of the medical cost incurred by the insured.
Health insurance provides security against any unforeseen medical emergency and many plans offer cashless hospitalisation too. The policyholder also gets tax benefit on the purchase of a health insurance policy under Section 80 D. Various types/categories of health plans are available under this category to choose from.
Simple health plan
It is the most basic health plan and it covers medical/hospitalisation expense of the individual up to the extent of the sum assured. For example, if a person has taken a health plan for R5 lakh, he gets a cover of up to R5 lakh, which is the sum assured. This means if the hospital bill is R2 lakh, he/she can only claim another R3 lakh for any succeeding hospitalisation in the same year.
Restore plan
Restore plan is a new type of mediclaim policy that automatically reestablishes the sum assured in case it has been exhausted. For example, if an individual has purchased a health plan with a cover of R5 lakh and the same has been used up the sum assured available becomes zero. But under the restore option, the sum assured is restored to R5 lakh. However, different insurance companies have different options with respect to restoring the sum assured.
Health plans with investment options
Many health plans provide an investment option too wherein a part of the premium is ?invested?. The invested amount generates a fund value. However, utilisation of this fund value differs from policy to policy, with some companies offering a benefit of using this fund value as a substitute for the sum assured if it is exhausted.
Family floater cover
It is a unique policy which provides the option to cover the family members under one policy. Some insurers provide the option to only include spouse and children, whereas some also provide an option to cover other family members like parents. How does the floater policy work? Suppose a husband, wife and their child has been covered for R10 lakh, the cover can be used by any or more of them, in any proportion, subject to the maximum limit of R10 lakh.
Choosing the best plan
One has to keep in mind multiple factors like family size, cover requirement, past illnesses if any, age of entry among others to choose a health plan. If a person is married, it would be prudent to choose a family floater rather than individual health covers because by paying an additional amount, which is proportionately lower compared to individual covers for all the members, the entire family can be insured. In other words, a family floater will be cost effective as compared to taking individual covers for the members. However, if a person or any of his family members are prone to prolonged illness, then one can choose for restore option as this facilitates restoring of the sum assured.
Additional cover to group medical
Employees may get the benefit of group medical cover from their employers and hence they may not feel the need to go for an additional health cover at personal level. This may not be a prudent decision since company medical plan is available only till the person is in the company and is limited to certain amount. However, the cover ceases on changing the job or on retirementwhen it is difficult for an individual to get a cover. Even if he/she get a c over, the person will have to pay higher premiums due to the age factor. Thus, it is always advisable to have a medical cover over and above the one provided by the company.
Tax benefits
Section 80D provides taxation benefit for premium paid towards health plans. For individuals, the deduction available is R15,000 or the actual premium paid, whichever is lower. And an additional deduction of R15,000 can also be availed if a health plan is purchased for parents. If the parent is a senior citizen than the total deduction available is R20,000.
Cover drive
* Choose a policy which has maximum renewable age
* Choose one which gives an option to cover pre existing disease
* Try to avoiding switching of insurers over the years
The author is CEO and founder of Right Horizons