Expert advice

Oct 23, 2012,13.19 IST

Roongta explains the do's and don'ts of health insurance

Harshvardhan Roongta of Roongta Securities spoke to CNBC-TV18 about his views on health insurance.

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Below is the verbatim transcript of the interview

Q: The health insurance business has increased from Rs 2,000 crore to Rs 15,000 crore as of October 2012 and yet we find that a lot of people are still under-insured. What is the best gauge of how much and what kind of cover each one need. Also, how can investors decide from the plethora of plans which are available? How do you know which one is best suited for what requirement?

A: In the health insurance sector there are typically four kinds of plans which are available. The first one is a mediclaim that we popularly know as mediclaim. This is a plan which offers to reimburse all the expenses that you have incurred during the hospitalization period. So, this is known as mediclaim.

The second part is a critical illness plan which is offered. This is a plan which offers to payout a fixed some of money in case individual is diagnosed of predetermined illnesses. Now, what does this simply mean is that in the plan itself, in the policy there are couple of illnesses which are enlisted. The moment an individual is diagnosed of any of the illnesses that are mentioned, a fixed amount is paid out irrespective of whether there is any treatment taken or a person has been hospitalized, there is nothing to do with that.

The third kind of a plan is a surgerical benefit plan. It offers to make a fixed payout in case a person is advised to go for a surgerical treatment. The event which triggers the payout in this case is that he needs to undergo certain surgery. It has again nothing to do with a mediclaim, nothing to do with your existing cost or any other cost that you are going to incur during hospitalization.

The fourth plan that is available is a hospital cash benefit. There are certain expenses which are not covered under mediclaim policies. You incur those expenses during your stay in the hospital but they are not defined as medical expenses. So, to take care of that part of expenses the insurance companies offer a daily cash benefit plan which varies from Rs 1,000-4,000 a day. You can have a plan which gives you say Rs 2,000 a day of everyday of hospitalization. So, these are technically the four broader policies which are available.

Now, which plan to take? I would recommend every individual to go in the ascending order as I have mentioned. The first and most important is you need to have an adequate mediclaim policy which is the hospital expenses reimbursement policy. Then he can consider a critical illness and then so on.

Now, one thing very important, you don’t need to have all the four kind of plans in your portfolio. You have to assess your own individual needs and buy a plan which suits you more appropriately as regards to how much insurance should one have. Under the mediclaim it depends on the cost of treatment in the city which you live. So, if you are living in a metro like Mumbai or Delhi you need to certainly have higher sum insured. Within the city, you also need to decide if you are going to use a deluxe private hospital then obviously you need to have a larger sum insured because the cost of treatment in those hospitals are much higher. So, you could go in for about a Rs 10 lakh worth of a policy.

Within the mediclaim there are lots of features, there are different companies offering different types of polices. What one person needs to see and evaluate is that there should not be any sub-limits in the room rents. Normally mediclaim policies do have those conditions these days. Secondly, if you made a claim certainly you do not want to be penalized and the company should not be charging you more in the coming years of renewal.

Q: Is it better to go in for specialised products (Example - Religare Health has announced plans focussing on diabetes, critical illness etc.) or take an overall health cover? Is it better to take the family floater health insurance plan or individual policies?

A: The first and foremost requirement is that you should have an adequate mediclaim policy which is a hospital expenses reimbursement policy as I have mentioned. If you are considering a family floater vis-à-vis an individual policy, there are certain limitations of a family floater policy. Yes, there is a slight cost benefit if you cover your entire family together, but you have to understand, suppose you have a Rs 10 lakh cover onto your entire family, any one member can exhaust that Rs 10 lakh limit with one single ailment and the rest of the family members would be left without any insurance for the entire year.

So, if you have to go little more detailed into the features of the plan, you have to understand and if it suits your requirement, fair enough, you can go in for a family floater or else you can stick to an individual mediclaim policy with each member of the family. As regards to going for specialized products, if you have covered yourself adequately under mediclaim, then you may consider a critical illness or any specialized product in that category and then top it up with your existing mediclaim. This topic is a little more technical than what it seems to. So, I would suggest that it will be better off if you consult a professional and then take advice accordingly.

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