Buy it right

amp;149;At what stage of life should you buy health insurance?

The earlier,the better. As soon as you start working,buy a health cover for yourself. Later,when you have a family,get a cover for it too. According to Alda Dhingra,vice president,Prudent Insurance Brokers,Dont wait until you are 35 or 40. Insurers dont want to accept you at a higher age. They ask you to go for a medical checkup and if anything is discovered they deny coverage.

If your company offers a group health insurance cover,sign up for it. However,do not depend on it alone. Buy an individual cover as well. What if you are fired tomorrow or your company goes bankrupt? During this recession a lot of people have lost their jobs. They are in their 40s and are finding it difficult to get an individual cover. Their parents were also covered under their employers group plan. Now they too have no cover, says Dhingra.

amp;149;How much health insurance should you buy?

There is no formula as such. According to Amar Pandit,a Mumbai-based financial planner,Nobody should have a cover of less than Rs 3 lakh. If you can afford it,go for a higher cover. For a young child or someone in the 30s or below,a Rs 3-5 lakh cover should suffice. For elderly parents you must have a minimum cover of Rs 5 lakh. And if you dont make claims,then you get a no-claim bonus and your cover goes up by 5 per cent every year.

Dhingra favours buying the highest amount of cover you can afford. People think of health insurance only for normal diseases or small surgeries. But what about catastrophic illnesses? Routine illnesses can be dealt with a Rs 1-2 lakh cover but catastrophic illnesses and accidents require Rs 10-20 lakh. When it comes to health insurance,plan for the worst, she says.

According to Veer Sardesai,a Pune-based financial planner,the amount of health insurance you buy should be commensurate with the type of city you live in and the healthcare costs there. For a middle-class person in a tier-one city he suggests a cover of at least Rs 5 lakh. At the same time,he warns against the risk of buying too much cover. Buying excessive health insurance can come in the way of building wealth, he says.

The bottomline: have a minimum cover of Rs 5 lakh for the elderly and

Rs 3 lakh for the rest; buy more if your pocket permits.

amp;149;Should one buy individual covers or a family floater?

Here,too,opinions vary. Sardesai favours using a floater policy for a young family and individual covers for the elderly. For somebody up to 45 and for the young child,buy a floater policy. It allows you to cover the whole family at a lower cost. You could use the lower cost to buy more cover, he says.

When you become older,floaters are priced according to the age of the eldest family member,which makes them expensive. For elderly persons Sardesai suggests buying individual covers.

Pandit believes it is better to go with individual covers from the outset. Many people prefer floater policies because of their lower cost. The other logic given in their favour is that not all members of the family will fall ill at the same time. But what if that happens? Suppose one member of the family falls ill at the beginning of the year and uses up 70 per cent of the cover. The rest of the family is then underinsured for the rest of the year. He suggests that once you have bought individual policies for each member and wish to enhance the cover,then buy a floater as a second policy.

The bottomline: if you buy a floater,then the sum assured should be much higher than what it would be for individual covers.

Find out about another risk that floaters pose: how easy will it be to move from a floater to a standalone policy once you are in your mid-40s?

amp;149;How should you go about choosing the insurer?

The most important criterion is the claim settlement record of the company. Ask the agent or broker from whom you are buying for data on claim settlement: of the claims that the insurance company received the previous year,how many did it settle? How quickly did it settle them? Says Pandit: You may not get perfect answers to these questions. But if the company is good it will at least attempt to answer them. Others will right away say that they will not provide these statistics. Go with the former.

Since an agent sells the product of only one company,he is unlikely to know or to provide you the right answers. Financial planners might be a better bet in this regard. Asking friends and family members who have had dealings with insurers might also help.

Further,the financial strength of the insurer and of the financial conglomerate to which it belongs should be checked. Many private insurers are suffering heavy losses in health insurance. Individual policies are profitable but group policies are extremely unprofitable causing insurers to bleed, says Dhingra. What if a loss-making insurer pulls out of this business when you are at an advanced age?

If buying from an agent,buy from one for whom selling insurance is a full-time job,and who is likely to continue in this field for the next 15-20 years. A good agent should help you with the running around required at the time of claim settlement, says Pandit.

amp;149;Next,find out who the third party administrator TPA is. Make similar enquiries about the TPAs service standards. Thereafter,go to the TPAs web site and check the list of hospitals empanelled with it. Does it include the hospitals that you prefer?

Look at what the insurer has to offer in terms of pre-hospitalisation and post-hospitalisation cover. Some insurers want to do a medical test,especially if your age is on the higher side. Go with one who will cover you without a test.

Those insurers who have passed muster on these qualitative parameters can then be compared on premium rates for the amount of cover you want.

amp;149;Whom should you buy health insurance from a general insurer,a standalone health insurer,or a life insurer?

Most experts suggest buying health cover from either a general insurer or a dedicated health insurer. They vehemently oppose buying it from a life insurance company. Says Pandit: Health insurance is not the primary focus area of life insurers. Their policies are complex as they combine life insurance with investment and health insurance. Besides,the benefits are not great while the costs are high. Adds Sardesai: What many life insurers offer is hospitalisation cash benefit. This means that they pay a sum of money for each day spent in the hospital. They dont reimburse you for the actual expense incurred,as a mediclaim policy does.

amp;149;Should you buy a critical illness policy as a rider or should you buy it as a standalone policy?

Critical illness is a benefit kind of policy. Once a person is diagnosed with a critical illness and he survives for 30 days,he is paid a fixed sum of money,irrespective of whether he has incurred that expense or not. By contrast,mediclaim is a reimbursement type of policy: the insurer pays the expense you have incurred.

According to Pandit,you should buy a good critical illness cover by age 35. Choose the policy that includes those diseases of which there is a history in your family,or which you could be susceptible to owing to your lifestyle.

On whether to go for a rider or a standalone policy,Pandit says: Critical illness is an expensive cover. Premiums go up substantially every five years. Initially cover it through a rider. Later,go for a standalone policy. Riders usually provide a cover of up to Rs 10 lakh. For a higher cover buy a standalone policy.

Before you buy a health insurance policy educate yourself about what is without doubt a complex subject. Visit insurers web sites,read policy documents and speak to your financial planner. If you buy without understanding exactly what you are purchasing,it could cost you dearly at a critical juncture in your life. u

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