You may have a health insurance cover from your employer or have bought one for your family and parents. Health insurance has been the most commonly used personal insurance. Despite the fact that most of the employed professionals have medical insurance, it is often too little to provide adequate protection.
While it’s easy to understand why health insurance is important for your family, you could be missing a few features of your policy or covered inadequately. Here are a few reasons why:
If you want to really use health insurance to your benefit, you should know a few basic facts about the plans.
1. Two Types of Health Insurance Plans
There are two distinct types of medical insurance plans:
You are more likely to avail a defined contribution plan from your employer. Defined contribution health plans are where you pay a specific premium based on your age and maximum sum assured (S.A.). However, the amount of claim benefit will depend on the actual expense you incur.
For example, you may have a defined contribution health plan with S.A. of Rs. 10 lakhs. If your hospital bill in the policy year is Rs. 1 lakh only, the plan will reimburse this much. The rest of the benefit amount remains untouched.
You can also use one single plan to cover your entire family (self, spouse and children) and parents. However, you should keep the cover for parents separate and use senior citizen health cover if they are above 60.
Defined benefit plans, on the other hand, work based on the diagnosis of the disease or health condition. The plan also defines the health conditions under which it will pay the benefit sum assured.
These plans also provide higher coverage, as many of the covered diseases would need expensive treatments.
Critical health insurance of Rs 25 lakhs will release the entire Rs. 25 lakhs, if you are diagnosed with a life-threatening heart condition. You can use the money for treatment and running your household too if needed. You will need both defined contribution and defined benefit plans for adequate protection against health emergencies.
2. You Need Both Types of Plans
You will need both defined contribution and defined benefit plans for adequate protection against health emergencies. The defined contribution medical insurance will work in case of hospitalisation and any treatment given while hospitalised.
The defined contribution plan may not cover specific therapies and medicinal expenses adequately. You may, however, buy a larger cover but it’s way too expensive. Instead, adding a defined benefit plan will help you fill the gap at a much lower cost and higher coverage.
But, having one does not eliminate the need of the other. Defined benefit plans only work in the case of specific diseases with specific conditions. Under more normal hospitalisation or injuries, you will still need the reimbursements from the defined contribution plan.
3. Health Insurance is For Your Financial Protection
Health insurance plans whether it’s a defined contribution or benefit, has one single purpose – ‘to protect you financially against the sudden healthcare costs.’
So, while buying a health insurance plan you should account for your financial condition and healthcare expenses. In the case of defined benefit plans, you should also consider your household expenses, as you may need the money for that as well.
This is because many times the treatment for a life-threatening disease may require you to leave the job and affect your earning capacity for some-time.
4. Top 3 Diseases Cause More Than 30% of Deaths
Defined benefit health cover works in the case of specific diseases. However, not all of these diseases have similar chances of occurring. In fact, heart and cancer ailments cover 1/4th of the entire risk. So, if you buy a cover for the top 2 diseases – heart and cancer separately you will cover about 25% of the risk.
The second most proliferating disease is respiratory infections. However, their treatment can be easily covered by your contribution health plan.
Also, standalone heart and cancer cover plans will cover even the minor stages of the diseases which is not available in the comprehensive plan.
5. Cover for Alternative Treatments
While a common perception is that most health insurance plans cover only allopathic treatment costs and many plans do, many cover the alternative treatments as well. To check specific conditions, see the policy brochure or document before purchase.
In defined contribution plans, the type and cost of treatment do not matter, and the plan will pay the defined benefit if the health conditions are met.
Covered under Section 80D
You can claim the premiums for both types of plans as a deduction under section 80D of the Indian Income Tax Act. The maximum deduction under this section is Rs. 25,000 for family (self, spouse and children) where all members are below 60. For senior citizens, the coverage goes up to Rs. 50,000.
The deduction limit includes medical expenses you incur out of pocket in case of senior citizens. Since you can also cover your parents, the total limit of deduction goes up to Rs. 75,000.
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