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Money talk: Creating a robust health coverage of Rs 50 lakh

DECCAN CHRONICLE. | ADHIL SHETTY
Published Apr 29, 2019, 12:41 am IST
Updated Apr 29, 2019, 12:41 am IST
A super top-up health insurance plan covers your hospital expenses in full over and above the threshold of your normal health insurance plan.
Health insurance is a basic need for every man, woman, and child regardless of their age or income.
 Health insurance is a basic need for every man, woman, and child regardless of their age or income.

A 2018 report said that medical inflation in India is likely to rise at twice the rate of the inflation rate. So if the inflation rate was five per cent for the year, the cost of healthcare rose 10 per cent. This means that if you had a health insurance cover of Rs 5 lakh last year, it’s effectively worth 10 per cent less this year. There is also the implication that in a high, double-digit inflation year, medical inflation will be oppressively high. Should this be of concern to you? Absolutely. Health insurance is a basic need for every man, woman, and child regardless of their age or income. Anyone may need hospitalisation or suffer from a serious illness that requires prolonged treatment. Therefore, it’s necessary to not just have health coverage but also scale up it meaningfully to tackle inflation. This is for your peace of mind. The tax savings are just a useful byproduct.

START WITH BASIC COVERAGE
The key to large health coverage is to first lock in your basic coverage. This coverage can be Rs 5 to Rs 10 lakh if you are in your 20s and 30s. For individuals, this would be easy on the pocket. Assuming you are a 30-year-old male with no tobacco habit, you can avail a cover of `5 lakh with annual premiums ranging from Rs 5,300 upwards.

 

A cover of Rs 10 lakh for the same person would cost upw-ards of Rs 7,400 per annum. Note that such a coverage should be separate from your employer-provided health insurance.

Such coverage is no doubt useful but may have limitations such as inadequate sum assured and the prospect of losing coverage once your employment ends.
Therefore, one must always own a retail health plan that can be selected as per one's unique needs and can be continued for a lifetime. It’s also important to get this coverage while you're young. As you get older, the premium costs rise as well as your chances of your health risks.

GET A TOP-UP
Now that you have base coverage, you can consider using top-up plans to expand your total coverage. This will protect your finances against even extremely serious health episodes that have the potential to your family's finances.

For example, the treatment of serious, metastasized cancer at private hospitals in India can easily run upwards of Rs 20 lakh. This is where a top-up can substantially extend your coverage without pinching your pockets too hard. Let’s say you had a base cover of Rs 10 lakh and you're seeking to extend the coverage to Rs 50 lakh.

You can avail a top-up of Rs 40 lakh. Interestingly, with a deductible of Rs 10 lakh, this additional coverage of Rs 40 lakh will cost you upwards of Rs 8,200 per annum.

HOW A DEDUCTIBLE WORKS
Deductible is what you pay by yourself before your health insurance pays for you.

For example, you have a health insurance policy of Rs 50 lakh with a deductible of Rs 10 lakh. You have a hospitalisation that costs you Rs 25 lakh. Here, the first Rs 10 lakh need to be borne by you — either out of pocket or by your base health covers. The remaining Rs 15 lakh can be borne by your top-up plan.

DIFFERENCE BETWEEN TOP-UP & SUPER TOP-UP
A super top-up health insurance plan covers your hospital expenses in full over and above the threshold of your normal health insurance plan.

Unlike a top-up health insurance plan, that covers only a single hospitalisation cost exceeding your regular health insurance threshold, the super top-up health insurance plan covers multiple hospital bills.

Let’s understand this with an example. Let’s say your basic health insurance has a cover of Rs 5 lakh.

Apart from this, you have a choice: you can take a top-up or a super top-up both with a cover of Rs 10 lakh with a deductible of Rs 5 lakh. Let’s say your hospitalisation bill is Rs 9 lakh. So your basic cover will pay Rs 5 lakh. The top-up and your super top-up can both cover the remaining cost of Rs 4 lakh.

Let’s say you have been hospitalised thrice in a year with bills amounting to Rs 9 lakh, Rs 2 lakh and Rs 2 lakh. Your base plan provides Rs 5 lakh for the first hospitalisation and is exhausted thereafter.

Your top-up provides Rs 4 lakh in the first, and no coverage in the next two hospitalisations because in any claim, the coverage kicks in only after the threshold of Rs 5 lakh. However, your super top-up provides Rs 4 lakh in the first, Rs 2 lakh in the second, and Rs 2 lakh in the second.

Keep these features of the super top-up plan handy and proceed to sign up for a plan that best suits you. Remember compromising on today's premiums may not prove to be beneficial tomorrow!

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