Purchasing Health Insurance in India - Which plan to buy?

According to the National Health Profile 2015, less than 20% of the population in India is covered under health insurance. As a result, the out-of-pocket expenses for an average Indian is high; in urban areas around 75% of out-of-pocket expenditure is on medicine. These statistics, especially in today’s world should not be taken lightly.

Health insurance today is more relevant than ever, due to rising incidence rates of lifestyle diseases among the youth in the country coupled with inflating healthcare costs. Sedentary lifestyles, irregular food habits and long working hours have ensured that the average age of patients has decreased and currently the population at risk lies in the age bracket of 30+ as compared to the conventional 40+ segments. The World Health Organization (WHO) has identified India as the nation which will have the highest occurrence of lifestyle diseases in the next few years.

In such a scenario, health insurance should be right at the top while planning one’s financial priorities. To understand which health insurance plan fits the bill, firstly one needs to be clear about the types of health insurance available in the market today. Health insurance can be broadly classified into two types – Indemnity plans and Fixed Benefit Plans.

Indemnity plans reimburse the expenses that the insured has incurred with a cap on the maximum amount that can be payable. Certain expenses may be excluded under Indemnity plans and it should be noted while purchasing the policy. Fixed Benefit plans on the other hand provide a lump sum payout on the occurrence of certain events like hospitalization, surgery or diagnosis of a critical illness. The payout is defined as a percentage of the Sum Insured (the total cover under the policy).

An indemnity plan mostly comes in handy when you are hospitalized due to minor ailments wherein the expenses due to tests and hospitalization are all taken care of. But in case, one is diagnosed with a major critical illness which would require a much higher amount of expenses, an indemnity plan will not be enough. A Fixed Benefit plan with Critical Illness and Surgical Benefits is perfect since the lump sum benefit provided will be adequate to cover the costs of good quality treatment and any residual amount can be utilized to service incidental costs that arise during the recovery process. Thus, the two kinds of plans serve different purposes and both should be included in one’s health insurance portfolio.

The next step in the health insurance purchasing process would be to decide on the amount of cover that is required. While deciding the same, one should consider his or her age, the costs of healthcare in city hospitals and the inflation rate related to these costs. A common belief amongst health insurance buyers is that there is employer provided health insurance which is considered as a base on which you take additional cover. The fact that employer provided health insurance only lasts as long as you are with the same employer and may not be there with subsequent employers is frequently overlooked. Ideally, one must always purchase adequate cover without accounting for employer provided coverage, to make sure that there is no shortfall when the payouts are actually required. Further, health insurance cover should also be reviewed regularly in lieu with milestones in life, like marriage, childbirth or adding parents to the policy post their retirement.

An icing on the cake comes in the form of the tax benefits* that are offered for health insurance purchases under Section 80D of the IT Act, 1961.

The biggest mistake that one can make is waiting for someone in the family to fall seriously ill before purchasing health insurance. One needs to be proactive in managing health risks since sudden illnesses and the costs associated with it can burn a hole in their savings meant for other financial goals and impact daily quality of life. With adequate health insurance, comes peace of mind, knowing that one is protected from most of these costs.

To know more about Health insurance plans you can log into HDFC Bank NetBanking (Life Insurance section), visit the HDFC Bank website (Life Insurance section) or you can contact your nearest HDFC Bank branch.

* The above mentioned tax benefits are subject to changes in tax laws. Please contact your tax consultant for an exact calculation of your tax liabilities.