Additional insurance makes you better equipped to face financial challenges and difficulties during medical crisis
A corporate health insurance plan is a prerequisite offered by most employers that shows you are an asset to the organisation. An employer-sponsored health insurance plan usually covers the employee, their spouse, children, and even dependent parents. Even though the insurance coverage is valuable, solely relying on a corporate health insurance plan may not be the best idea.
Limitations of Corporate Health Insurance Plan
A corporate or group health plan, as it is popularly known, offers only a limited scope of coverage. In most cases, the insurance coverage ranges from Rs 2 lakh to Rs 5 lakh, per employee. It could go higher depending on your designation and the monetary value of perquisites.
However, it does not take into account the specific needs of your family. For example, a household with senior citizens will need a larger cover to account for age-related issues, or the provision to increase cover if you have a child – neither of which is possible with a standardised group insurance plan.
More importantly, in the event of a major hospitalisation or diagnosis of a critical illness, the sponsored coverage would be grossly insufficient considering the expensive and complex treatment required. This is especially true for prolonged illnesses or the ever-increasing healthcare costs in larger cities of the country.
In addition, once a claim is made, the coverage for the year is exhausted, leaving you and your family open to financial risk, should any other health issue strike.
Another key factor to consider is that the terms of insurance are tied to your employment. The coverage is only valid till the time you are employed with the organisation. In fact, in some companies, the insurance ceases to exist in the notice period itself. If you lose your job, retire from active service, or proactively move on from your job in pursuit of entrepreneurial ventures, your insurance cover will cease with immediate effect. In such a scenario, you will be left with adequate coverage in case an emergency arises.
Moreover, trying to get an individual health insurance plan after a certain age can be difficult and expensive due to increased risk to the insurers. This will put you under financial strain as you may not have an active source of income post-retirement. It’s always better to get an individual health insurance plan as early as possible.
How to Plan for Supplemental Health Insurance
Getting an individual health insurance policy for yourself and your loved ones is a wise option. Acting as an additional layer of protection, this will help you be better equipped to face financial challenges and difficulties during a medical crisis. To reduce the strain of buying individual insurance, begin early. In a scenario where you only want a supplemental cover and wish to reduce the money spent on insurance, you should keep a few things in mind:
Start by understanding the quantum and type of coverage offered by your employer as stated in employment and group insurance documents shared with you. This will help you identify the amount of additional coverage you need.
To choose supplemental insurance, consider factors such as your career status, number of dependents, pre-existing illnesses, disposable income, as well as present and anticipated insurance needs of the family, which can be determined by considering hereditary diseases as well. Based on this, you will have to choose between an individual health plan and a family floater plan. If you are the primary earning member of the family, consider buying a super top-up plan. These plans offer higher coverage at affordable premiums and allow for multiple claims during the policy term that can benefit all family members.
Accounting for escalating medical costs, every family should have health coverage of at least Rs 10 lakh over and above the group insurance. The actual estimate will vary depending on your family’s needs. You could also consider getting add-on riders such as accidental death benefit and critical illness riders that provide iron-clad financial protection against all kinds of health contingencies at a fraction of the cost.
It also makes good financial sense to choose a plan with a high No-Claim Bonus (NCB). An NCB is a reward offered to the policyholder for every claim-free year. It may be offered either as a discount on subsequent premiums or as a percentage increment to the sum assured. Most insurance companies offer an NCB of 10 per cent for each claim-free year, up to a maximum of 50 per cent over five years, while some even offer as high as 100 per cent NCB, effectively doubling your coverage at no extra cost.
For any minor issues, you can always take advantage of the corporate health insurance plan and leave your health plan untouched, thereby allowing you to accumulate a higher NCB. A good way to approach this would be to use your employer's cover before your cover. This way, you have the opportunity to receive the NCB (if applicable), along with hospitalisation costs arising from any pre-existing illnesses.
Having an employer group insurance cover is no doubt a valuable benefit. However, to truly secure the health and financial well-being of your family, you should invest in a well-rounded personal health plan, pronto!
The author is Co-Founder and CBO, Scripbox.
DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.