An expensive proposition

Publication: Business Standard, Mumbai;   Date: Feb 10, 2008;    Section: Product Analysis;   

Health Plus has a few positives but does not satisfy your basic insurance needs. A plain vanilla Mediclaim is still the best option. 
After the private insurance companies, Life Insurance Corporation of India (LIC) entered the health insurance space last week with “Health Plus”. The product enters the market at a time when only 11 per cent of Indian population has any form of health insurance. 
The main features of Health Plus plan are: 
•Hospital Cash Benefit (HCB) : Daily allowance between Rs 250 and Rs 2,500
•Major Surgical Benefits (MSB): Maximum up to 200 times of daily allowance. The upper limit Rs 5 lakh. Only Open heart surgery, brain tumor, renal and lung transplantation covered 100 per cent, rest all covered between 40 per cent to 60 per cent of sum assured)
•Domiciliary Treatment Benefit: This can be claimed after three premiums are paid. Maximum of only two payments are made towards this benefit. Only 50 per cent of the fund value can be withdrawn with the condition, that a balance of at least one annualised premium should be there in the policy fund
•Maturity Benefits: Fund value, if any, is payable at the end of the term Health Plus is essentially a Unit Linked Health Insurance Plan (Ulhip) with a heavy debt orientation. The exposure to equities is more than 10 per cent but less than 50 per cent. Within the debt space there is exposure to short-term money market instruments as well as corporate debt and government securities like traditional LIC plans. 
Health Plus works like a typical Ulip, where the premium paid is subject to deduction of allocation charges of 30 per cent in first year and 6 per cent from second year onwards. The balance is credited into a “Policy Fund Account” (PFA). Now from the PFA, there are policy administration charges, premiums for HCB and MSB with service tax at the rate of 12.36 per cent are deducted every month. Policy fund will then be invested in a combination of money market, debt and equity investments. 
A key point of the policy is that it does have a cashless facility, unlike the traditional Mediclaim from non-life companies. A highlight of the policy is that it caters to the immediate needs, in case of accidental bodily injury. A waiting period of 180 days is prescribed for HCB in other sicknesses. The minimum premium payable ranges from Rs 5,000 for single life to Rs 10,000 a year for a family of three or more. 
People in the age bracket of 18 to 55 years can take the policy and the benefits available till 65 years age of the policyholder. In respect of children, the benefits are available up to 25 years of age. 
Some of good points of this policy are:

•The benefits increase by 5 per cent every year (although there is a cap of 1.5 times)
•Health Insurance is a cover with no maturity benefits. This means that, if there are no claims, there is no return of premium. However, in this policy, there is some value that goes back to the policy holder on maturity, based on performance of the fund.
•There are no surrender charges. If the policy is surrendered before completion of three years, the policy fund value, as on date of surrender, will be paid to you after completion of the third year.
But there are some negatives as well. These include:
•This is an expensive policy with high premium allocation charges of 30 per cent in the first year and 6 per cent every year. Besides this, the charges for daily allowance are very high too. For a 20-year old the charges for a daily allowance of Rs 100 per day is almost Rs 28. Besides this there are MSB charges, policy administration charges (Rs 75 per month in first year and Rs 25 per month from second year onwards), fund management charges(1.25 per cent a year) and service tax (12.36 per cent)
•The cover provided by the policy is not very high. It is a maximum of Rs 2,500 per day of daily allowance and Rs 5 lakh for MSB. Even in surgical benefits, there are various subsections and the maximum benefit for most surgeries is between 40 per cent and 60 per cent of the total cover. For spouse and children, the covers are much lower.
•Besides this once a surgery is done under one category say, eye surgery, then you will not get to do the same surgery again because it would come under a pre existing clause.
•The maximum benefit period for the cover is 365 days, with only 18 days in the first year and 60 days, inclusive of ICU stay, from the second year onwards.
•This is not a cashless policy and the benefits can only be claimed through reimbursements. 
Is this policy for you? 
No, not as a primary cover. First buy a mediclaim policy then, go for something like this. If you are in the age bracket of 25 to 35 and already have a Mediclaim of Rs 4 to 5 lakh, there is no pressing need to take this cover, except if you are worried about accidents. This is because this policy offers you extra money, if you were to spend more than what you can claim from your existing policy. 
Broadly speaking, a low cost policy with higher benefits would be great. But as of now, we do not have such an option. The entry of life insurance companies into the health space could mean better options at a later date. 
(The writer Amar Pandit is director, My Financial Advisor.) 

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