A comparison of hospitalisation cash and pure medical insurance plans

Having a health insurance is necessary. But it does not always cover your entire expense.

The fine print elucidates limited reimbursement of hospital room rent, medicines and doctor's fees. Also, at times, insurance companies reimburse on the basis of standard charges of the hospital and not the bill amount. To get rid of these uncertainties, some life insurers have come up with plans that offer fixed cash for different illnesses and surgeries. The payment is made irrespective of the actual bill. For example, if you undergo a bypass surgery and the fixed cash payout is Rs. 3lakh, the company will pay the entire amount, despite what you pay the hospital.

"The insured knows in advance the amount that will be paid. He/she does not need to go through the hassles of claiming and still not getting the entire amount," says Pradeep Pandey, vice-president (health), Aegon Religare Life Insurance. New policies by Aegon Religare Life Insurance (Aegon Religare Health Plan), ICICI Prudential Life Insurance (ICICI Pru Hospital Care II) and Max New York Life Insurance (Max New York Life LifeLine Healthy Family Plan and LifeLine MediCash Plus Plan) are comprehensive, cashless and offer payment for illnesses and other features.

These categorise surgeries in different grades. The cash is offered based on the grading. For example, Aegon Religare Life Insurance has put heart transplant and coronary artery bypass graft in the highest category. Depending on the plan, the insured is paid Rs. 2-5 lakh.

However, if the surgery is not performed, the insurance company pays for the room rent in the daily cash plan. In case of illnesses such as malaria or dengue, the cost of hospitalisation can be Rs. 15,000-20,000 if the person is admitted for threefour days. A fixed cash payout policy with a sum assured of Rs. 4lakh will pay Rs. 4,000-8,000. Also, indemnity policies cover the insured for both pre- and post-hospitalisation. Most fixed cash health insurances do not have this feature. "If you add the payouts for different heads (surgery, daily cash etc) in fixed cash insurance, the total cannot be compared to the coverage that indemnity products offer," says Gaurav Mashruwala, a certified financial planner.

Here are a few more differences, which may help you decide between the two products:

Sum assured

In most fixed cash plans, you don't need to share the sum assured with family members. For example, If you take a policy with a sum assured of Rs. 4 lakh for two adults in the family, you will get a total cover of Rs. 8lakh. For more members, the sum assured increases accordingly. ICICI Prudential Life's product allows the sum assured to be shared among family members, like in a family floater plan. In family floater plans, the sum assured (maximum Rs. 10 lakh) is shared between the family members. For a higher cover, you need a top-up plan (maximum Rs. 20 lakh).

Cost

Financial planners say if you compare benefits and premiums, indemnity health policies are cheaper. For example, a family floater (indemnity plan) from ICICI Lombard General Insurance for two adults (eldest member aged 40 years) with a sum assured of Rs. 4lakh come for an annual premium of Rs. 7,702. The fixed cash plan from ICICI Prudential for two adults (eldest member aged 40 years) with a combined annual limit of Rs. 4lakh is for an annual premium of Rs. 9,440. In this plan, the daily hospitalisation cash benefit is Rs. 1,000, the intensive care unit benefit is Rs. 1,000 aday and the highest payout within the surgical benefit is Rs. 1.5 lakh.

Caveats

In indemnity products, renewability of insurance is not guaranteed. Additionally, if there is a claim in a year, on renewal of insurance company charges, there is an extra premium called loading. In fixed cash products, renewability is assured, and some of these policies revise rates once in three years. However, hospital cash policies are valid for a particular term (10 or 15 years). Once the policy term is over, an individual has to re-apply. This means dealing with new terms and conditions.

Claims

While you need original bills in traditional insurance policies, photocopies are accepted in fixed cash policies. This means if you have two policies, you can legally claim from both the insurers. Financial planners feel despite the comprehensive coverage, these policies cannot replace indemnity health insurance policies. "You can use it as second policy (or a rider) if your sum assured in the health policy is low or you rely on group insurance policy that your employer provides," says Brijesh Dalmia, acertified financial planner.

Source: http://epaper.business-standard.com/