The Mediclaim or individual health insurance plan including Family Floater plan is an indemnity plan while a critical illness or a cancer insurance plan is a benefit-based insurance plan.
Insurance regulator IRDAI is contemplating to allow life insurance companies to offer indemnity-based health insurance plans. As of now, life insurance companies are allowed to sell health insurance plans which are only benefit-based. To study the feasibility of allowing life insurers to offer indemnity-based health policies, the regulator has set up a committee.
As per the IRDAI (Health Insurance) Regulations 2016, life insurance companies are allowed to offer Benefit-based health insurance products only. However, as per IRDAI, representations have been received from Life Insurance Companies to allow them to offer indemnity products as well. The indemnity health insurance plans work differently from benefit-based or defined-benefit health insurance plans. The Mediclaim policy or individual health insurance plan including Family Floater plan is an indemnity plan while a critical illness or a cancer insurance plan is a benefit-based insurance plan.
The regulator had earlier allowed life insurers to offer indemnity plans but later on stopped them in doing so.
In the benefit-based plan, the insurer is obliged to pay the entire sum insured to the policyholder on the occurrence of the specific event. However, in an indemnity plan, the insurer is obliged to pay or reimburse the actual amount of hospital expenses.
For buying a benefit-based plan such as a critical illness plan, one can get it from a standalone health insurance company, a general insurance company or from a life insurance company. However, currently for buying an indemnity plan such as Mediclaim, one can buy it only from a standalone health insurance company, a general insurance company.
The other big difference of health insurance plans available with life insurance companies is that the benefit-based plans offered by them generally have a longer tenure. On the other hand, Mediclaim kind of plans can be bought by paying an annual premium and renewed thereafter.
The portability is another issue that would be required to be looked into. Currently, portability of indemnity plans is allowed between a standalone health insurance company or a general insurance company. It remains to be seen whether the regulator allows indemnity plans to be sold by life insurers and at what terms and conditions. As a buyer, its always good to have more choices and options to make a better-informed decision.
For anyone buying a health insurance plan should be the first step even before starting to invest. By paying a fraction of premium, one gets coverage to take care of rising medical costs. Ideally, the Mediclaim kind of indemnity should be the first purchase and later on one may add defined benefit plan such as critical illness as the second rung of defence against hospitalisation expenses.