Tag: sum insured

Should you buy a critical illness cover for yourself and family?

Personal Finance

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We are looking for a suitable critical illness policy for our son (39 years) and his wife (32 years). Both have independent term plans for ₹1 crore and ₹50 lakh, respectively. They also have a medical insurance plan with a base plan for sum insured (SI) of ₹3 lakh and top- up plan for ₹15 lakh which also covers their eight-year old daughter. We are now looking for a suitable critical illness policy to cover both the husband and wife for an insurance of ₹50/25 lakh and request you to suggest a policy that is rich in features but does not pinch the pocket.

Meenakshi Guar

Your son and his family are adequately covered for health. Given their young age and a small daughter, a health insurance cover with total SI of ₹18 lakh should suffice. If they want to buy a critical illness (CI) plan as it will provide a lump sum in hand at the very diagnosis of a critical illness, it is suggested that they first think through the purpose of buying the cover. If they fear any particular illness, they should go for disease-specific covers. There are special diabetic covers and also heart and cancer care plans in the market. ICICI Prudential Life’s Heart and Cancer Protect (covers 18 major and minor hearts ailments cancer including carcinoma-in-situ and early-stage cancer) is a good option. On the other hand, if they are looking for a plan that would cover all major critical illnesses, they can choose from a bunch of plans in the market that include products from life and general/health insurers.

Critical illness policies offered by general and health insurers come with life-long renewal option as per guidelines of IRDAI. Life insurers can’t offer life-long renewal ; their CI plans would end after a specific term. That said, note that life-long renewability is valid only till the policyholder is in good health. Once she/he gets diagnosed with a major illness and makes a claim, be it a policy with a life insurer or a general/health insurance company, she/he can’t renew it again. Future Generali Life’s Heart and Health plan (covers 59 critical illnesses) is an option they can consider here. It offers cover of a maximum of ₹50 lakh. Aditya Birla Health’s Activ Secure Critical Illness plan that covers 64 critical illnesses (including angioplasty and pacemaker insertion) can also be considered.

HDFC ERGO’s my: health Women Suraksha, is the only comprehensive women health policy in the market (covers osteoporosis too). Your daughter-in-law can consider this. It offers six different plans. One of them is a comprehensive critical illness cover that will pay for 41 chronic illnesses, including kidney failure, end-stage liver failure, Parkinson’s and Alzheimer’s along with cancer and heart ailments. The policy is offered with multiple SI options, ranging from ₹1 lakh up to ₹1 crore. The policy allows all women in the family including mother and mother-in-law to be covered under a single plan.

All suggestions mentioned above are comprehensive insurance plans. So, in terms of premium they may not be the cheapest in the market.

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What you need to know about assured income plans

Personal Finance

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The Covid-19 pandemic has led to increased awareness, and interest, about life insurance and more importantly about in financial security. Taking cues from this, some life insurers have launched guaranteed income products — Assured Income Plus Plan by Aditya Birla Sun Life and New Assured Wealth Plan by Future Generali are a few of them to name.

These products are considered long-term savings plans that offer assured returns at a pre-determined rate at regular intervals. But they may not suit everyone. The premium for these products are on the higher side compared to term plans.

So, before you go for an assured income plan, you must understand the basics of the product to decide if it meets yours and your family’s requirements.

How does it work

Guaranteed income products are usually non-participating, non-linked policies. That means, these products are not market-linked and insurers don’t share profits of the company (in the form of bonus) with the policyholders. Instead of declaring bonus, life insurers provide guaranteed returns (at a pre-determined rate on total annualised premium paid) and sum assured will be paid on maturity.

Many insurers offer the choice on how you want to receive your maturity amount, provided the premiums have been paid regularly. You can receive the pay-out either monthly, quarterly, half-yearly or annually or as a lump-sum.

When it comes to premium, you have the option of paying for a limited period while the policy covers you for the entire period. Most insurers offer 3-4 options for premium payment term. That means, if it’s a 20 year policy, you could pay premium for, say, five years only, and the policy will continue to cover you for another 15 years.

In case of death of the policyholder during the policy period, most policies in the market would pay the sum assured to the nominee, higher of 10 times of annualised premium or 105 or 110 per cent (varies with each policy) of total premiums paid up to the date of death.

Advantages

Guaranteed products come with a few advantages. One, the maturity proceeds from such products are exempt from tax. Two, policyholders get a fixed rate (determined at the time of policy issuance) until maturity of the policy. According to Vivek Jain, Head – Investments (Life Insurance), Policybazaar.com, the top guaranteed products in the market offer 5.5 to 5.8 per cent on average as return. This is in addition to the life cover they offer. On the other hand, guaranteed life insurance plans are suitable mainly for risk-averse individuals. Sarita Joshi, Product Head, Probus Insurance, says, “People who are aged 40-years and above should consider adding guaranteed product to their investment portfolio”

Also, guaranteed products usually entail high premium payments in the initial period when compared to plain vanilla term covers. The maturity proceeds are received only after a long period of, say 15 or 20 years. Your money gets locked-in for a long time and your returns may not always factor in the prevailing inflation.

Today, with interest rates having possibly bottomed out, and expected to rise going forward, you will be locking in to a conservative return for the next 10-15 years. Further, it is advisable to opt for a term plan for protection and consider other financial instruments, if one wants better returns.

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₹1-crore health plan is a sensible idea

Personal Finance

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Until a few years ago there were no options to get a sum insured (SI) of over ₹5 lakh in health insurance in India. Today, there are a handful of insurers offering ₹1-crore health cover for self and family. However, is there a need for ₹1-crore health insurance? Also, will one get benefits such as treatment outside India and a deluxe room while in hospital?

Before we delve deeper into this topic, note that health insurance plans are indemnity covers that pay for the medical bill on hospitalisation up to the sum insured. They are not like the critical illness insurance plans that pay the full amount of SI at the first instance of hospitalisation irrespective of the hospital bill.

There are still reasons for you to go for health insurances plans and not critical illness plans if you want to cover hospitalisation expenses and ₹1-crore health cover makes more sense.

 

The logic

In regular health insurance plans, you can make claims on the policy as long as there is SI left in the plan; the cover is renewable life-long. In contrast, the critical illness (CI) plans are one-time covers; once claimed, the policy pays the full value of cover and terminates; you can’t renew the policy again the next year. But most critical illnesses recur after a few years and by that time if you had exhausted all the money form the first claim, you will be without any back-up to pay for hospitalisation. So, it is recommended that you buy a health insurance policy that by regulation is renewable life-long and can take care of the recurring medical expenses throughout your life time.

The next question is how much cover? Treatment cost of chronic ailments, including cancer, run into lakhs of rupees. Rather than guessing how much cover you would need, you can take a ₹1 crore cover at the age of 35-40 years for your peace of mind.

As you age, if you find the premium expensive, you can reduce the SI by a few lakhs, but you would still continue to enjoy a large cover without fresh underwriting. On the other hand, if you had say ₹5-10 lakh cover and in your mid-40s want to increase the SI to say ₹25-30 lakh, there will be fresh underwriting and waiting period, and it can’t be easily done.

Currently, the ₹1-crore health plans are not expensive at all. Check this: For a 35-year-old male, in case of Max Bupa, the annual premium for ₹25 lakh SI plan is ₹14,626 and the cost of ₹1 crore plan is a lower at ₹10,992. Similarly, in case of Aditya Birla Capital, while the annual premium for ₹25 lakh SI is ₹11,245, the premium for ₹1 crore cover is ₹9,557.

Insurers price the ₹1-crore plans cheaper, assuming there are rare chances of claims over ₹25 lakh.

One thing to note that both the above ₹1-crore plans are combo plans – of base policy of ₹5 lakh and a super top-up of ₹95 lakh. The super top-up will get triggered the moment the base policy SI is exhausted. Since both the base and super top-up covers will be with the same insurer, there will be hassle-free claims process.

For a single plan of ₹1 crore, you can go for Care Health Insurance’s Care Advantage, but it is more expensive than both plans mentioned above.

A ‘no-frills’ plan

If you think that the ₹1-crore health plans will come with benefits of international coverage and high-end deluxe rooms in hospitals, sorry. There are no added frills in the ₹1-crore plans. These plans have the bare minimum necessities for someone looking for a hospitalisation cover. That said, they cover single private room accommodation, come with NCB, and cover all-day care procedures as regular plans and pre/post-hospitalisation for 30 and 60 days respectively, as usual. In Care Health’s Care Advantage plan for ₹1 crore, however, all category rooms, including suites are covered.

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