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A Bewildering Range of Medical Insurance Options- How to Choose?
February 01 , 2013

Medical insurance has come a long way from the simple 'Mediclaim' policy that people used to earlier take primarily for tax benefits. Even from the same insurance company, there are different types of medical policies, offering different features and benefits. To top it all, there are a set of riders which you find hard to understand and choose from. Some of these may seem (and indeed be) overlapping in their features.

But what do you need to ensure your basic concerns on medical insurance are taken care of at the lowest possible premium? How do you ensure you aren't buying unnecessarily overlapping features? Read on, to understand the basic things you need, the merely 'good to haves' and the unnecessary ones.

Everyone needs a Basic Mediclaim

The Basic Mediclaim policy is a reimbursement of treatments that require hospitalization- anything where you are admitted for a day or more. For such a disease or accident, it covers all expenses even before and after the actual hospitalization period. For some treatments (like cataract operation) that are nowadays done without needing admission, the Mediclaim is still valid.

We would strongly advise taking this policy for every member of your family, including children. A 'Family Floater' is simply the same Mediclaim covering all members under a single policy. It gives your family a total cover, which could be utilised by one or more members falling ill. You could opt for this as a convenient alternative to taking separate policies for each member. Rs 3 lakhs - 5 laksh of medical cover will keep you free from financial anxiety on the medical front.

It is important to understand the limitations of a Mediclaim though. It only covers cost of treating an illness- it does not compensate you in case your illness makes you unable to earn. For instance, a disease like cancer can be extremely expensive to treat; and it can also make you unable to work for years thereafter. For this, we look beyond the Mediclaim to policies that are sometimes offered as rider.

Critical Illness Policy- A 'Good to Have'

For a set of about a dozen debilitating diseases (such as stroke, cancer, blindness, etc) you get a lump-sum payment on diagnosis. This payment has nothing to do with the costs you incur in treatment. Indeed, you can get this in addition to the regular Mediclaim that reimburses you the cost of treatment.

Critical Illness Policy addresses the point made above- about getting some compensation for loss of income. Most Critical Illness Policies today have an upper limit of about Rs 20 lakh - Rs policies 25 lakh of payout. We suggest that taking the maximum possible limit is a good policy to have, in addition to the 'compulsory' Mediclaim.

Disability Cover- A 'Good to Have'

The one thing that has fallen between the cracks so far is partial or total disability. We often take a good life insurance cover, but the prospect of disability is even more unpleasant to think about. In today's market, a maximum of Rs 20 lakhs - Rs25 lakhs of disability cover is available as a separate policy. This doesn't look like a lot for something as bad as a permanent disability, but something is better than nothing. It's a good policy to have.

Disability covers are sometimes also available as riders in life or medical insurance policies. However, in such cases, the cover is very low (typically less than Rs10 lakh). We recommend avoiding such riders. If at all you want disability insurance, go for it separately with a much higher cover.

Personal Accident Cover- Avoidable

A life insurance cover for personal accident is available- both separately and as a rider to life insurance. However, we consider this an unnecessary cover to take, for three reasons:

  1. Life insurance, if taken adequately, provides for death due to any reason, including accident. Thus, you are duplicating schemes and paying unnecessary premium for an additional cover for the same thing
  2. Medical and disability covers mentioned above cover the other possibility- of accident needing hospitalisation or putting you out of action. Again, a Personal Accident Cover simply duplicates this and costs you more premium
  3. The cover available for accident is often very low (Rs 10 lakh or less). This is woefully inadequate as a life cover or protection against permanent disability. So it's simply not worth your while.

Summary

In summary, take the medical cover as a family floater for every member of your family. If you do not have it (or the life insurance cover) yet, take it now! Critical illness and disability covers are good to have. Next time you get a bonus, you can keep aside some of it to start one of these two policies. All other riders and covers often end up duplicating what you already have, and add to your paperwork and headache- you can avoid them all.

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