Hike health insurance coverage as well to keep pace with medical inflation
Are you planning to go on a holiday in December? One of the tasks you probably plan to undertake during the break is a thorough review of your investment portfolio. Don’t forget to carry out the same exercise for your insurance portfolio as well. In particular, your term and health insurance covers must be subjected to a thorough scrutiny, as they are vital for ensuring your family’s financial well-being.
More responsibilities, higher coverage
Having adequate term insurance is important as this ensures that the family’s financial goals are not jeopardised even in the event of the breadwinner’s untimely demise.
The policyholder’s financial responsibilities may have increased during the year. “The insured may have got married or may have been blessed with a child. Both these developments imply an increase in financial responsibilities, necessitating a higher coverage,” says Indraneel Chatterjee, co-founder, RenewBuy.
Buying more term cover also becomes essential if one’s liabilities have gone up. “The insured may have taken a big-ticket loan,” says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.
There may also have been a change in the family’s financial situation. The spouse, for instance, may have left his job.
All these circumstances would necessitate an increase in coverage. One can buy an additional policy to increase coverage. This will require going through the documentation process and medical tests. “To avoid these hassles, one can buy a term cover with the increasing cover feature, where the sum insured keeps on increasing with time until it reaches the maximum limit,” says Chatterjee.
In some scenarios, a person may want to reduce his sum assured, say, if one has paid off a large loan. Retirees may want to do the same. “Often people buy term cover whose tenor is until the age of 75-80. But if they have taken care of most of their goals, and they don’t earn an income anymore, they may reduce the amount of term cover they have,” says Dhawan.
Claim settlement ratio
To ensure that the policy you hold is of a high quality, check the insurer’s claim settlement ratio. A high ratio increases the probability that the nominees will receive a payout. “Treat a declining year-on-year trend in the claim settlement ratio as a red flag,” says Dhawan.
Your insurer should also have a high solvency ratio. The Insurance Regulatory and Development Authority of India (IRDAI) has stipulated that every insured must have a solvency ratio of at least 1.5. “The solvency ratio tells whether the company is financially stable. The higher the rate, the greater is the company’s capability to settle claims,” says Chatterjee.
If during the past year you have heard a lot of negative news about your insurer, review your decision to continue with it.
Compare your policy’s premium with the going rate in the market for your age bracket. While term insurance premiums have risen in the past couple of years, they are lower today than they were, say, 10 years ago. Despite higher age, it may be possible to replace the current policy with a lower-priced one. If you decide to shift, acquire the new policy first before giving up the old one. There is always a chance that the new insurer may reject your proposal or apply a premium loading, in which case the shift may not be beneficial.
Finally, check the coverage provided by your company. If you have been promoted, your employer may have increased your sum assured. On the other hand, the opposite may have happened if your company undertook a cost-cutting drive.
Health cover: Is it enough?
The review on the health insurance side should also begin with an evaluation of whether you have adequate coverage. If you live in a city like Mumbai or Delhi, a cover of less than Rs 15-20 lakh may not suffice. A Rs 5-10 lakh cover may suffice for a tier II or III city, provided you are sure you won’t go to a metro for treatment.
Hiking the premium is also necessitated by medical inflation, which is estimated to be 15 per cent or higher.
You may also want to increase the sum insured due to lifestyle-related factors. “Earlier, you may have been satisfied going to a mid-tier hospital but may now desire a top-tier facility,” says Dhawan.
If the sum insured of your base cover is low, increase that first. If the base cover is adequate, say, Rs 10-15 lakh, then buy a super top up, which is likely to be less expensive.
Bear in mind that buying a super top up can make the claim process more cumbersome. “While you may get cashless benefit on the base cover, the claim on the super top up is likely to be met through a reimbursement,” says Nayan Goswami, head-sales & service, SANA Insurance Brokers.
The pandemic highlighted the importance of having a few key features in your health insurance policy. “Check whether consumables and domiciliary (home treatment) are covered,” says Goswami.
Those who travel abroad often may desire a policy that offers international coverage. Others may desire OPD (outpatient department) or mental health coverage. Consider porting if your current insurer doesn’t offer these features.
Your family’s age composition may also necessitate some restructuring. Move children who have crossed the age of 20 out of the family floater. “This may, in fact, prove to be more cost-effective since the age of the eldest member determines the pricing of a floater cover,” says Goswami.
Also check your current policy for sub-limits; room rent, ICU and procedure-related capping; and for copayment.
Scrutinise your corporate cover as well. Many corporates have, in recent years, stopped offering cover for parents (or have started demanding payment for it) as a cost-cutting measure.
At the time of the review, check your parents’ coverage as well. “They may be dependent on you to bear health-related costs. Sometimes this dependence is not stated explicitly. If that is the case, ensure that they are adequately covered,” says Dhawan.
What to do for health insurance
Age plays a crucial factor in your ability to hike the sum insured
Do so while you are still healthy; doing so after, say, 50, when you have a lifestyle disease or have undergone a surgery, may become harder
In a family, if the husband has a pre-existing disease, the family floater should be kept exclusively for him
The other members of the family, who are disease-free, should buy another family floater
When you port, the new insurer will offer you continuity benefits once it accepts your proposal
But at the time of porting your policy will be underwritten afresh
The new insurer will ask you questions pertaining to your health condition
If you fail to disclose something—say, a surgery that happened seven years ago—the new insurer can cite non-disclosure and refuse a claim or even cancel the policy
So, keep track of your medical history and reveal everything to the insurer that you would to a doctor