Question 1: Is it a good decision to move from a mediclaim policy to a unit linked health insurance plan?
The answer, according to Certified Financial Planner, Gaurav Mashruwala is a simple -- NO! Here are some important reasons:
Each surgery is paid for only once If the company has paid you surgical benefits for one surgery in a year, it will not pay for that again in the future. However, in case of mediclaim policies, if a medical condition was not pre-existing at the time of taking the policy, it will be covered in the future.
No 'no claim bonus' 'No claim bonus' is a big benefit in mediclaim policies ,which is absent in unit linked health insurance policies. In a mediclaim policy, for every claim-free year, you get an increase in the sum assured of 5 per cent for the same premium. That's how Manish has accumulated the bonus of Rs 2.31 lakh.
No cashless facility As of now these policies do not provide a cashless facility. Which means, you will first have to pay the expenses out of your pocket and then claim for a reimbursement. In most mediclaim policies, a cashless facility is available wherein the insurance company will settle your bills directly with the hospital.
Limited cover In unit linked health insurance covers, there is a finite list of surgeries that are covered. This does not include surgeries like fractures from accidents. LIC officials confirm that you can claim only the hospital cash benefit in these cases. Your mediclaim policy will, however, cover accidents.
Hospital cash benefit only for stay, over two days You can claim for hospital cash benefits only if you are hospitalised for more than two days. This means that if your hospitalisation charges per day is Rs 1,000 and you stay admitted for four days, the insurer will pay you only for the last two days. The cost of the first two days will be borne by you.
High charges on investment portion Because the investment portion is a unit linked plan, this policy suffers from what most unit linked plans suffer -- high upfront charges. For instance, LIC's Health Plus, charges 30 per cent of the premium in the first year and 6 per cent thereafter as policy allocation charge. For Reliance Health + Wealth, it is 25 per cent and 5 per cent respectively. Other charges include policy administration charges, fund management charges.
Question 2: How will the premiums be treated in terms of tax benefit?
Premum paid for the health cover will get you an exemption of Rs 15,000 under section 80D whereas the remaining premium invested in the policy's fund would give you an exemption of Rs 100,000 under section 80C.
Moneycontrol recommends:
For Manish, Mashruwala has a simple piece of advice, 'It's best to keep your investment and insurance needs separate'. Which means, continue with a mediclaim policy for health cover and invest in instruments such as mutual funds or provident funds for investments.
