Relying only on group health insurance? Here’s why personal cov

Financial Express 12/09/2018

Shailen (name changed), a senior citizen and a former employee with the Central government, all of a sudden started forgetting things. After normal tests and an expensive imaging of the brain, doctors said he needs a non-invasive brain surgery, which very few hospitals do in the NCR. After a private hospital in Delhi quoted Rs 30 lakh, he went to another private hospital in Gurgaon and got the surgery done for Rs 25 lakh. Now his family is in dark about how much money will be reimbursed by the Central Government Health Scheme (CGHS). While describing Shailen’s incident, Shivani (name changed), wife of a retired doctor of a government hospital who also underwent a surgery in the same hospital, said, “Taking health insurance is a must.”

If this is the opinion of CGHS card holders, one may just make a wild guess on the plight of people working in the private sector. Although a large number of companies provide corporate medical insurance cover to their employees, but it only creates an atmosphere of false security as makes them reluctant to take personal health insurance. Although employees usually get adequate medical cover (amount of which varies from organisation to organisation) during their working life, it is very important to simultaneously take their own policy. Here is why.

Policy renewable for whole life: Unlike a corporate health policy, which you can avail till you are working in the organisation, your own health insurance policy will remain with you as long as you keep renewing it. But make sure that the policy you are taking is renewable till you are alive. There is very little advantage in taking a policy which is renewable only up to a certain age limit, say up to 80 years. But don’t wait till your retirement to get a policy, as by that time you might start suffering from diseases and the policy you get may come with many exclusions resulting in non-availability of several benefits. You may also need to pay premium at a rate higher than that of a normal person or in the worst-case scenario, health insurance companies may refuse to accept your proposal. Better take your health insurance, prior to the age when pre-policy health check-ups become compulsory.

Accumulation of no-claim bonus: One of the main advantages of taking a personal health insurance policy early is the benefit of accumulation of no-claim bonus. Health insurance companies provide no-claim bonus for every claim-free year either in the form of discount on premium or by adding bonus to the sum insured calculated on the basis of a pre-decided percentage of the basic sum insured. So, for example, if 10 per cent no-claim bonus is added for every claim-free year, a Rs 5 lakh policy will become eligible for Rs 10 lakh after 10 claim-free years. So, accumulation of no-claim bonus is better than no-claim discount on premium. But make sure that it is being utilised at the same pace in case of claim, just as it is being accumulated in case of no claims. There will be no advantage of taking a health insurance policy early if the entire no-claim bonus becomes zero after a single claim or lapses after a few years.

Tax benefits: The premiums paid for health insurance policies are also eligible for income-tax deduction up to Rs 1,00,000 u/s 80D, which is over and above the limit of Rs 1,50,000 deduction u/s 80C. Out of Rs 1,00,000 deductions, Rs 25,000 (Rs 50,000 if senior citizen) is allowed on the premium paid by the proposer (the person who has availed the insurance) and his/her family and Rs 50,000 on the premium paid for his/her senior citizen parents. So, a senior citizen person in the 30 per cent tax bracket may save income tax up to Rs 30,000 by taking health insurance.

Relying only on group health insurance? Here’s why personal cover is a must