How to cover your Medical expenses through medical plans
Updated on 27 Oct 2016
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Your family needs a comprehensive cover against hospitalisation expenses.

The second most essential cover for you is a medical insurance policy. Some experts even say that medical insurance is more important than life insurance because the probability of a family member needing medical care is higher than the death of the breadwinner.

Medical care costs are rising very fast and even a 3-4 day stay in a hospital can leave you with a bill of Rs 50,000-60,000. In comparison, the cost of medical insurance is only Rs 10,000-15,000 a year. If you take into account the tax benefits offered on medical insurance under Section 80D, the costs for those in the highest 30% tax bracket are much lower at Rs 7,000-10,500 per year.

Avoid costly innovations
When buying medical insurance, don’t fall for innovative plans that promise you plenty of advantages. Most of the time the exclusions are not explained to the buyer and he ends up paying extra for a benefit that won’t come to him. Even if you read the fine print, you will not be able to understand the legalese and jargon used by the company. This is why a plain vanilla indemnity policy, which allows cashless hospitalisation or reimburses the expenses incurred, is the best medical policy you can buy.

Even if you want additional coverage, choose a policy that offers relevant benefits. A policy that offers maternity benefits will be of no use to a couple not planning to have children. A simple floater plan will be a much better option for them. If there is an elderly person in the family, it’s best to buy a separate insurance for him. This is because the premium of the floater plan is linked to the age of the oldest member and will bump up the overall cost of the insurance.
Is group cover sufficient?
Some people don’t buy health insurance because they are covered by the group cover from their employer. While group covers are helpful, they are usually not sufficient. There are a lot of exclusions and co-pay clauses. Besides, they are available only till you are an employee. When you change jobs, the medical cover also goes, leaving you vulnerable. This is why planners suggest that you buy medical insurance cover on your own.

If you have group cover but want to enhance the cover, you can buy a top-up plan. Top-up plans are very cheap because they kick in only after expenses cross a certain threshold. If your group cover is for Rs 3 lakh, buy a Rs 2 lakh top-up plan with a Rs 2 lakh threshold. In case of hospitalisation, the initial expenses of Rs 2 lakh will be borne by your group cover. If expenses exceed Rs 2 lakh, the top-up plan will come into play.

Cost of health insurance
Buyers will need different types of covers at various stage of life.
Do you need a critical illness cover?
A simple medical insurance plan may not be able to pay for the treatment costs of critical illnesses.

While a medical insurance plan reimburse normal hospitalization expenses, the cover may not be sufficient for some illnesses. The cost of treatment of certain critical illnesses such as heart ailments, cancers and liver diseases can be very high. For instance, a liver transplant can cost Rs 18 lakh. In many cases, the treatment can continue for years, draining the finances of the household.

You can buy a separate cover against critical illnesses or take a rider along with a life or health insurance policy. Though riders are cheaper, they don’t offer as much cover as a standalone critical illness policy. The best part is that these standalone critical illness plans and riders pay out a lump sum when the disease is diagnosed, which can be very useful for a policyholder.

It is best to go with a broad spectrum critical illness cover rather than choose one aimed at a particular disease. The cancer protection plans from some health and life insurance companies are priced lower than a critical illness plan, but will only cover one disease. Cancer is not the only ailment that threatens you. Lifestyle-related risks include heart ailments, diabetes, kidney and liverrelated illnesses. Hence, a wider coverage would be a wiser pick.

Buy a dedicated plan only if you are a heavy smoker or are employed in certain high-risk sectors. But the premium for such people will also be considerably higher.

How much does the treatment cost?

ACCIDENT INSURANCE TO THE RESCUE
Death or disability due to accident should not derail a family’s finances

Life insurance covers you against death and medical insurance pays your hospital bills. But what if you are injured in an accident that disables you, either temporarily or permanently? Before you answer this question, here are some statistics. India is the accident capital of the world. According to the National Crime Records Bureau, 4.52 lakh Indians died in accidents in 2014, with nearly 1.7 lakh of them dying in road accidents. The number of those injured in road accidents is at least three times bigger.

This is why an accidental death and disability cover is third on our list of essential covers. The policy will pay your nominee a lump sum amount in case of death due to accident. In case you are disabled, the policy will pay out a lump sum amount. There is an additional cover that provides a monthly income if you are unable to resume work due to the disability.

Accidental insurance is very cheap
Cost of insurance cover of Rs 25 lakh

THE BIGGEST RISK ON THE ROAD
Third-party liability cover protects you against claims by accident victims.

Insuring your vehicle is important because in case of an accident, the insurance company picks up the bill for repairs. What few people know is that the insurance company also compensates victims of accidents in which the insured vehicle is involved. This compensation can run into several lakhs of rupees and has on occasions even touched the nine figure mark. In 2002, a court awarded Rs 12 crore to the family of an NRI doctor killed in an accident. Even if he sells everything he owns, the average Indian driver will not be able to pay such a huge amount.

The good news is that this thirdparty liability insurance is mandatory for all vehicles and offers unlimited cover for injuries and death caused by the vehicle. Third-party premiums were hiked in April this year but are still low (see table). For Rs 2,000 a year, the owner of a midsized car is fully protected against claims by victims.

Some owners avoid buying insurance when their vehicle is very old. This can be a costly mistake. Even if you don’t want to insure your old vehicle against theft or damage, don’t miss paying the third-party liability premium.

Incidentally, general insurance companies have been lobbying for a cap on the liability for several years. They contend they are losing money on third-party insurance because the compensation is higher than the premium earned. They want that the insurance company should be liable to pay a maximum compensation of Rs 1 lakh in case of injuries and disability and Rs 10 lakh in case of death. If the owner wants a higher cover, he should pay a higher premium.

Third-party premiums are up but remain very cheap