Health Insurance Products, Their Features and Benefits

Types of health plan

There are basically four types of health plan available in the market. Let’s look at each of them in turn:

Individual health insurance plan
As the name specifies this plan covers a single individual and caters for their health requirements.

Family floater health insurance plan
A family floater plan is different from an individual health plan. In this type of plan family members can be covered. An individual can cover themself, their spouse, children and parents. The insurance company may specify the number of people that can be covered. In this type of plan the insurance cover is shared among the family members covered in no fixed proportions.

Group health insurance plan
This health insurance plan provides cover to a group of people who are brought together for a common objective. For example, a group can be the employees of a company. Many employers provide health cover for their employees to protect them against medical emergencies and some extend the group health cover to the families of the employees.

Daily hospitalisation cash benefit plan
In this type of health plan the insurance company pays the insured a fixed amount on a daily basis in the event of hospitalisation. The daily amount is fixed at the time of taking out the policy and is paid for the number of days the insured is hospitalised, irrespective of the actual amount spent on treatment (subject to the terms and conditions of the policy). The daily amount paid is fixed and may be more or less than the cost of actual treatment.

The insurance company may pay an additional amount on a daily basis if the insured is admitted to the Intensive Care Unit (ICU). In the case of critical illness or surgery an additional lump sum amount may be paid subject to the terms and conditions of the policy. The daily amount paid under this policy can be in addition to any other medical insurance policy that the insured may have. The policy has a limit on the total number of days in a year for which the daily hospitalisation cash benefit can be used. This is specified in the policy terms and conditions.

Features and benefits of health plans

Health insurance plans come with various features and benefits. Some of these include:

1. Pricing: the premium for a health insurance plan depends on the individual’s age, fitness, habits and family medical history. If all other factors remain constant, premiums increase with the age of the policyholder. So it is always better to take out a health plan as early as possible as the premium paid at younger ages is not very significant but will increase as the policyholder gets older.
2. Cashless facility: some health plans offer a cashless facility. In these plans the person covered under the plan is given a photo identity card. The insured needs to inform their health insurance company at the time of their admission to a network hospital. This is the group of hospitals that have contracted with a health insurance company to provide healthcare services. On approval the insured does not pay the hospital deposit amount or the treatment expenses, rather the invoices are settled directly by the insurance company as per the terms and conditions specified in the policy.
   
   In the case of admission to a non-network hospital, the insured has to settle the hospital bill themselves and is later reimbursed by the insurance company, subject to the submission of required documents and other terms and conditions of the policy.
3. Medical examinations: most health insurance companies require the proposer to undergo a medical examination before the policy can be issued and, depending on the age of the proposer, a number of tests may be carried out. Based on the doctor’s report, the health insurance company decides whether to accept the proposal and at what price.
4. Pre-existing illnesses: most health insurance policies cover pre-existing illnesses after a specified time period; commonly referred to as a ‘waiting period’. Some insurance companies may exclude some pre-existing illnesses altogether and this information is specified in the policy terms and conditions; for example a pre-existing illness like diabetes may be covered after, say, three or four years. The terms and conditions relating to treatment of existing illnesses may vary from company to company.
5. No-claim bonus: if there is no claim in a year then, at the time of renewal, the insurance company may offer a no-claim bonus, i.e. the insurance company will give a discount in the premium due next year.
6. Permanent exclusions: health insurance plans have some permanent exclusions which are specified in the policy, e.g. misuse of drugs or not following medical advice.
7. Immediate care: treatment is available immediately and at a time convenient to the policyholder. There will be no waiting for a future appointment whilst the policyholder is suffering from a treatable medical condition.
8. No need for lump sums from savings or loans: the policyholder does not have to worry about how to manage when the need for medical payments arise because these will be paid by the insurance company as a result of the premiums already paid.

Riders

As discussed in section A2, riders allow policyholders to customise their insurance cover with additional benefits. In this section we shall consider some examples of riders.

Accidental death benefit (ADB) rider
In the event of the death of the insured due to an accident, this rider provides for an additional amount over and above the normal sum insured, as specified at the time of taking the rider. The death should be a result of an accident by external, violent, unforeseeable and visible means. The payment made under this rider is subject to terms and conditions specified in the policy.

An ADB rider has a high significance in India considering the increasing number of deaths due to accidents. The insurance company specifies the products with which this rider can be taken and also specifies the list of exclusions under which the benefit of the rider will not be payable.

Term rider
This rider can be used to enhance the death cover amount in a policy at a nominal cost. If an individual wants a savings policy like an endowment policy or money-back policy and at the same time wants to increase the death cover without buying a separate term insurance policy, then they can opt for this rider. The insurance company specifies the products with which this rider can be taken and also specifies the list of exclusions under which the benefit of the rider will not be payable.

Critical illness (CI) rider
This rider provides payment of a specified amount on the diagnosis of a critical illness (CI). The payment can be used for any purpose including payment for medical treatment, hospital admissions or assisting with the loss of income after the diagnosis of a CI. The illness should be covered in the list of CIs specified by the insurance company for this rider. The list may differ among insurers.

Insurers specify the minimum entry age, maximum entry age, maximum maturity age and minimum and maximum sums insured for the rider. These figures vary among insurers. The insurer may also specify other terms and conditions pertaining to the rider. The insurance company specifies the products with which this rider can be taken and also specifies the list of exclusions under which the benefit of the rider will not be payable.

Waiver of premium (WOP) rider
This rider waives future premiums in the event of the disability of the policyholder due to illness or accident resulting in their inability to work. The insurance company continues paying the premiums on behalf of the policyholder and the policy continues normally.

This rider is ideal for helping to prevent a policy lapsing due to non-payment of premiums arising from the disability or death of the policyholder.

In the case of some child plans the WOP rider comes built-in, while for others it is an optional benefit. The WOP rider ensures that in the event of the death of the premium-paying parent the policy continues normally and the child’s future does not suffer. In such cases, the premium is waived until the intended benefit, as per the policy terms, reaches the child.

Insurers specify the minimum entry age, maximum entry age, maximum maturity age and the minimum and maximum sums insured to which the WOP applies for the rider. These figures vary among insurers. The insurer may also specify other terms and conditions pertaining to the rider. The insurance company specifies the products with which this rider can be taken and also specifies the list of exclusions under which the benefit of the rider will not be payable.

Other riders offered by insurance companies
Some other riders offered by insurance companies include:
Surgical care rider: This rider pays the treatment costs for surgery involving the insured’s brain, heart, lungs, liver etc. subject to the terms and conditions specified at the time of opting for the rider.

Hospital care rider: This rider pays the treatment costs in the event of hospitalisation of the policyholder, subject to the terms and conditions specified at the time of opting for the rider. Under this rider payment may be made in two ways. An insurance company may pay the actual cost for the treatment (subject to what is covered in the rider terms) or it may pay a specified amount on a per day basis for the number of days the policyholder is hospitalised. The insurance company may also pay an additional amount on a per day basis if the policyholder is admitted to ICU. The practice among insurance companies varies. This rider is similar to the individual policies mentioned in section B1.

Guaranteed insurability rider: This rider gives the insured the right to increase their cover in response to different life events, such as marriage, child birth, buying a house etc.

Features and benefits of riders

Features and benefits of riders are listed below:

• Additional cover: by adding riders the insured can purchase extra protection. Riders help to enhance the quality and scope of cover.

• Nominal cost: riders come at a nominal cost compared to buying a new plan. For example if a person buying an endowment plan wants to enhance the death cover, then instead of buying a separate term insurance plan they can add a term rider and enhance the cover at a nominal cost.

• Customisation: riders help in customisation of the health plan according to the preference of the customer. Insurers also find it convenient to have a small number of basic plans with riders as options to help the client have a number of options to choose from. Each plan can be taken with one or more riders. Five basic plans and seven riders, effectively provide 35 or more options.

• Flexibility: many riders can be added or removed at the will of the policyholder, thus providing a high degree of flexibility.

• Tax benefits: premium paid for riders qualifies for deduction from taxable income under relevant sections of the Income Tax Act.

IRDA regulations for riders
As per the IRDA regulations issued in April 2002 and amended in October 2002:

• the premium on all riders relating to health or critical illnesses, in case of term or group insurance products shall not exceed 100% of the premium of the base policy;

• the premium on all the other riders put together should not exceed 30% of the premium on the base policy; and

• the benefits arising under each of the riders shall not exceed the sum insured under the base policy.

By these regulations the IRDA has put a limit on the number of riders that can be offered with any policy. It is possible that these limits may be amended from time to time.

Anand Khemka
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