The second wave of COVID 19 is wreaking havoc in India. Not only physically and mentally, but financially too. Medicines and oxygen are costing much more, and hospitalization expenses too have gone up manifold. We have been getting many queries on how insurance cover can be increased or taken, especially for parents.
Those in formal employment may have parental cover, but this is limited to Rs 3-5 lakh and the risk of not having the cover due to unemployment remains. The self-employed, of course, need to fend for their families as they do not have the benefit of group covers.
Importance of health cover reinforced
For a long time, health insurance was looked upon as an unnecessary expense and people did not look beyond their employer provided cover. Over the last one year, with COVID-19 affecting the population, individuals are scampering to increase the health cover for self and parents. The high cost of policies and the complexity of the terms are making it difficult to do so.
Also read: For senior citizens, a regular health cover works better than a dedicated policy
Consider this: the premium of a base senior citizen policy of Rs 5 lakhs is between Rs 20,000 -27,000 per annum. It costs Rs 50,000 per annum for a Rs 5 lakh cover for both parents. It is high and, at the same time, the cover will not suffice for illnesses such as cancer. Given the cost of medical expenses, a cover of Rs 10-20 lakhs along with critical illness is a must. But this doesn’t come cheap.
In all financial products, there are economical options available and but these are most often not promoted. The same is the case with health insurance.
Super top up plans have been around for long, but did you know that they are a cost-effective way of taking high cover at very low cost? A super top-up plan of Rs 20 lakhs costs Rs 10,000 per year, for individuals in 61-65 years age group! Much more affordable than Rs 25,000 premium, that too for Rs 5 lakhs cover only.
A super top-up plan works similar to a health policy and covers hospitalization but comes with a deductible. The deductible is amount which needs to be paid by the insured for any claim. In case of super top up, once the claims at an aggregate level cross the deductible limit, the claim would be paid by the insurance company. For example, in case of a Rs 20 lakh policy with Rs 3 lakhs deductible and 2 claims of Rs 2 lakhs each, the first claim would need to be borne by the insured. In the second claim, Rs 1 lakh will need to paid by the individual as it is within the deductible limit of Rs 3 lakhs and the balance Rs 1 lakh will be paid by the insurance company. Any furthur claims will also be covered.
Most policies offer sum assured between Rs 5 to Rs 50 lakhs with a deductible ranging from Rs 3 lakhs to Rs 5 lakhs. There are covers of Rs 1 crore with higher deductible of Rs 10- 20 lakhs available too. As the deductible increases, the premium falls. For example, Rs 20 lakh policy for a 61-year-old, with Rs 3 lakhs deductible costs at Rs 10,000 p.a. but with Rs 5 lakhs deductible costs at Rs 8000 p.a. A Rs 1 crore policy with Rs 5 lakhs deductible for a 61-year-old costs at Rs 15,000 only!
Wide coverage of super top-ups
Most Super top up plans also cover day procedures including chemotherapy and come with benefits like restoration benefit. Some also have a critical illness cover built in and can be taken for periods of 2 or 3 years. Super top up plans can be taken as family floaters and no claim bonus also applies. However, it is important for policyholders to check the exclusions, waiting periods for illness & pre-existing diseases and if there are any sub limits especially on room rent while evaluating different plans.
Also read: Policies with hospital room rent sub-limits can inflate your out-of-pocket expenses
Like term plans provide high cover at a low price to cover life, super top-up policies should be chosen for health insurance says Srivathsan, managing director, Intent Health Technologies. According to Srivatshan, it is not necessary to have a base policy in order to purchase a super top-up plan. And this is the biggest benefit of the super top-up plan. There is no need to buy a base policy which is more expensive and has a lower cover.
While employer cover can be used to cover the deductible amount, it is best to set aside a “health fund” for that amount. The health fund can be invested in a combination of low duration and short duration debt funds. This along with the emergency fund will take care of the deductible expenses.
A super top up with health fund should provide protection for major health expenses but buying it early is better as it means lower costs and continued cover. Don’t wait for parents to retire to start the cover. The chances of rejection are higher at older age due to the advent of medical issues. These covers are available for age band 91 days to 65 years.
Being proactive with physical health translates to better health. The same applies to finances. Be proactive and not reactive.