To combat the gigantic costs of health treatments there is need to have a financial arrangement in the form of “Fixed Benefit Health Insurance Plans.”
Harjot Singh Narula
There is a surge in the critical illnesses diagnosed among masses in India over a decade, which could be associated with lifestyle factors, hereditary factors, environmental factors, etc. If we talk about statistics, one in three people fall prey to lifestyle related disease like diabetes, high blood pressure, a cardiac ailment as per India Fit report from GOQii. The World Life Expectancy report highlights that stroke, cancer, heart and lung diseases constitute the substantial number of deaths in India.Close to 38 lakh people in India are suffering from a fatal disease like cancer in 2012-14 as per the National Cancer Registry Programme.
Medical advancements and technological innovations offer cure of many critical illnesses but involve a huge treatment cost.An average cost of chemotherapy to treat cancer may range between Rs 60,000 to Rs 2 lakh per cycle based on the stage of cancer. The Coronary Artery By pass Graft (CABG) surgery cost between Rs 2 lakh to Rs 7 lakh or more.A heart transplant surgery cost falls somewhere between Rs 14 lakh to Rs 26 lakh. The treatment costs are exorbitant, especially if the treatment is taken in a metropolitan city as compared to a non metro city.
For an average middle-class Indian household, such enormous treatment cost becomes unaffordable, especially in the case of a family with a single income. Insufficient funds for treatment results in liquidating one’ life’s savings, borrowing from friends and family or financial institutions which aggravate the plight of the household in such distress times. For many households getting the expensive treatment or surgery done is beyond the financial capacity, if not backed up with a well planned financial arrangement.
To combat such gigantic costs of treatment and to keep pace with the inflating treatment costs for critical illnesses, there is need to have a financial arrangement in the form of “Fixed Benefit Health Insurance Plans.”
What are Fixed Benefit Health Insurance Plans and how it works?
Fixed benefit health insurance plans offer fixed and guaranteed amount equivalent to the sum insured to the policyholder in case of an occurrence of an insured event as per the policy terms. Such plans offer you a lump sum amount as claim irrespective of the actual or intended expenses incurred.It is a defined benefit health insurance plan and does not work on the principle of indemnity.It is up to the policyholder how to utilize the claim amount.
Fixed benefit health insurance plans include insurance products like Critical Illness Insurance Plans, stand alone Cancer/Heart Insurance Plans, Daily Hospital Cash plans where the benefits payable are fixed.
For example, if you have opted for a Critical Illness Health Insurance plan of sum insured Rs 10 Lakhs, and during the policy year, you are diagnosed with any of the listed critical ailment under your plan. The insurance company will pay you a lump sum of Rs 10 lakh as a claim pay out (assuming it’s a legitimate claim). Either your expenses are Rs 5 lakh or Rs 15 lakh, the insurer will pay you a fixed/guaranteed amount of Rs 10 lakh and the policy is terminated thereafter.The framework, terms, and conditions of fixed health benefit plans may vary from plan to plan.
Why Should You Buy A Fixed Benefit Health Insurance Plan?
• Lump sum Payout: The insurance company will pay you a fixed lump sum amount on the occurrence of an insured event.The amount is equivalent to the sum insured under the policy irrespective of the actual treatment cost.The lump sum payout gives a sense of financial security to the insured to finance the treatment and other incidental costs associated with the ailment.
• No worries of Sub limits: Usually under a regular indemnity based health insurance plan, there are restrictions in the form of sub limits like room rent capping, mandatory co-payment, disease specific sub-limits. But under fixed health insurance plans, the policyholder can get rid of such sub limits and can utilize the claim amount as per his or her acumen for the treatment.
• Caters to non-medical expenses: Treatment and recovery tenure under a critical illness is long, which might result in a loss of earnings or livelihood for an individual temporarily or permanently. Along with medical expenses, there are non-medical expenses like frequent travel expenses for treatment, household expenses, kid’s educational expenses and other allied expenditures. With fixed lump sum payout, such expenditures can also be taken care of. Therefore, such plans can also be seen as an income replacement plan.
• Cost Effective insurance plan: Fixed benefit insurance plans are nominally priced, and the premiums are competitive. For a 35-year-old male, non-smoker, a sum insured of Rs 10 lakh will cost him between Rs 2,000 to Rs 4,000 yearly covering major critical illnesses under one umbrella plan. Fixed benefit health insurance plans offer financial security at nominal premium prices makes the purchase affordable.
• Assured renewal: The policyholder can renew the fixed benefit health insurance plan with ease annually without any renewal hassles. On the renewal premium payment, the plan gets activated again offering the financial protection throughout the policy term.
• Ensures a financial backup: Diagnose of any critical illness will certainly result in emotional and financial trauma.With the financial backing of such plans, the insured could concentrate on the treatment process ahead without the hassles of arranging money. One need not have to touch their lifelong savings or assets to finance the treatment costs, which gives a significant relief in such times of distress.
• Tax Benefits: The premiums paid towards the purchase of critical illness health insurance plans are tax deductible under section 80D of the Income Tax Act.
Important points to ponder regarding Fixed Benefit Health Insurance plans
• It is important to go through the “Survival Period” clause under the fixed benefit plan. The survival period clause states that the insured has to survive for a specified number of days after being diagnosed with the critical illness to get the claim amount.There are plans which come with a zero survival waiting period.
• Pre existing diseases are covered after the completion of the specified waiting period as mentioned under the policy conditions.
• The premium is a major factor, but it should not be considered in isolation.It is imperative to consider the key benefits, inclusions, and exclusions before finalizing your fixed benefit health insurance plan.
• Do read the policy wordings carefully and ensure that the major critical illnesses are covered under the plan.
Critical illness can happen to anyone irrespective of the age in today’s scenario. The average ticket size of an indemnity based health insurance plan is between Rs 3 Lakh to Rs 5 Lakh which will primarily take care of the inpatient hospitalization expenses.On the other hand, fixed benefit health insurance plans offer a robust lump sum financial sum to afford the treatment costs of the terminal illness along with non-medical expenses.Therefore, it is important to have a fixed benefit health insurance plan in conjunction with the indemnity based health insurance plan to ensure the comprehensive health insurance protection.The writer is Founder & CEO of ComparePolicy.com