Port, Buy Top-Ups To Tackle Rising Health Premiums In Old Age

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Port, Buy Top-Ups To Tackle Rising Health Premiums In Old Age
Port, Buy Top-Ups To tackle Rising Health Premiums In Old Age
Versha Jain - 30 June 2024

Healthcare costs can eat into your retirement corpus, so buying health insurance makes sense. If rising premiums are holding you back from buying a cover, here are some tips to reduce the outgo

Healthcare cost should be one of the major factors you should take into consideration when planning for your retirement.

It is now a well-known fact that healthcare costs are rising at a much higher rate than retail inflation. Compared to retail inflation, which is around 4-5 per cent, medical inflation is more than double at 14 per cent, according to a report by the insurer Plum. In other words, a commodity that costs Rs 1,000 today may cost Rs 1,628.89 in 10 years. In contrast, a treatment will cost Rs 3,707.22 in the same period.

So, if you are not prepared, healthcare costs can eat into your corpus and make life difficult.

According to the Health Insurance For India’s Missing Middle report released by Niti Aayog in 2021, Analysis from Brookings India, based on NSSO surveys, shows that over 7 per cent of India’s population is pushed into poverty every year due to healthcare costs.

In such cases, health insurance can come to the rescue.

According to a research titled Health Insurance In India, in the International Journal of Engineering, Management, Humanities And Social Sciences Paradigms (IJEMHS), “In India, people are not very aware of health insurance, and only a small part of the population takes advantage of it. Even well-educated people ignore the necessity of having proper health insurance coverage.”

However, low awareness and rising premiums often pose a hurdle. Senior citizens could find the cost even more prohibitive, as premiums rise with age.

So what does one do to bring down the cost of mediclaim? Says Parthanil Ghosh, director and chief business officer at HDFC ERGO, “Keeping health insurance premium costs low is essential to manage healthcare expenses.” He suggests that maintaining a healthy lifestyle, and availing of discounts, such as loyalty and long-term renewal discounts, among others, can make insurance affordable.

Buy A Top-Up Cover

One of the most effective ways to reduce the overall premium outgo is to buy a top-up policy along with the base policy. Here, the base policy can offer a smaller coverage, and the top-up coverage can be of a larger amount, to ensure adequate coverage.

Seniors often do not have sufficient coverage because of high premiums; it may also be possible that insurers are unwilling to provide them higher coverage due to underwriting issues.

Says Rupinderjit Singh, senior vice president, retail health, Acko General Insurance, “There is a higher possibility that if seniors have health insurance, they may only have a coverage of Rs 3-10 lakh. This is not sufficient, and they may already have existing health conditions. They may find it difficult for insurers to accept them for a higher coverage amount for a base cover. Hence, they can complement the coverage with a top-up product and get sufficient coverage. The top-up plan may cost only a fraction of their base cover.”

Top-up policies come with a deductible—the amount the policy will not pay for, and which has to be borne by the policyholder. This is also the reason why they charge much lower premiums. The sum insured of the base policy should ideally be equal to the deductible to cover that gap. Both policies can be used together for expensive treatments. Ghosh says the higher the deductible, the lower will be
the premiums.

Says Santosh Puri, senior vice-president, health product and process, TATA AIG General Insurance: “One should prefer buying one base policy to avoid any overlapping covers and/or benefits which the customer will be utilising under any one policy, such as annual health check-ups, vaccinations, and so on. One should also consider buying a super top-up policy where the top-up acts as a supplementary cover. This will avoid overlapping coverage and ensure protection against large catastrophic claims.”

However, it is important to choose the combination carefully. Says Singh, “Some insurance companies offer base plans with comprehensive coverage, while the top-up plan comes with restrictions on room rent, co-pays, and so on, thus making the combination of a base and top-up plan relatively cheaper than a comprehensive base plan. One should understand the difference in the terms and conditions so that they don’t end up making a wrong choice.”

A lot of experts also recommend buying the base policy and the top-up or super top-up policy from the same insurer to ensure that the claim settlement process is smooth later.

Consider Porting

It is important to compare costs between different insurance policies. If you think you already have a high-cost policy, you could consider porting to a cheaper one.

Apaar Kasliwal, executive director of PolicyBoss.com, an insurance aggregator, was earlier quoted as saying by Outlook Money, “In case you are dissatisfied with your current insurance cover, or, the insurer is not willing to offer new-age covers that are available with other insurers, or you are dissatisfied with the hospital network offered by your existing insurer, you may consider porting your health insurance policy.”

However, when doing this, it is important to look at the features of the new policy. It’s possible that the new policy is cheaper because it has higher deductibles, sub-limits, restrictions on the treatment of some diseases, and so on. Also, the network of hospitals of the new insurer may be different, and you may need to check accessibility.

Also, the new insurer might require the policyholder to undergo medical tests afresh. In such a situation, if tests reveal new medical conditions, fresh waiting period or exclusions may be included in the new policy. “Should the new insurer classify the policyholder as a ‘high-risk individual’, they may even reject the application,” said Rakesh Goyal, director, Probusinsurance.com, an insurance brokerage firm to Outlook Money earlier.

Assess Family Floater

Family floater policies, which are typically bought for the entire family, including younger members and parents, may not be advisable. This is because sometimes the premiums are calculated based on the age of the eldest member.

However, in some cases, it may make sense. Says Puri: “If the premium is calculated based on the age of the eldest member, one should buy a separate policy for parents and one for the husband, wife, and the child. However, if the premium is calculated based on individual insured persons, then one must opt for a family floater policy. This will provide an added benefit of a higher family floater discount on the total premium.”

In general, it makes sense to take a separate policy. Says Siddharth Singhal, business head, health insurance, Policybazaar.com: “It is advisable to have a separate comprehensive health insurance plan for aged parents or senior citizens, which can ensure that they get relentless and high-quality treatment, if need be.”

Take Preventive Care

Taking preventive healthcare measures can also help in reducing costs, as insurers look at a healthy lifestyle favourably.

Tapan Singhel, chief executive officer and managing director of Bajaj Allianz General Insurance, in a recent interview with Outlook Money, talked about how it benefits the industry: “If people are healthier, the claims should be lower. So, it’s benefiting the insurance companies. What we don’t realise is the basics of the insurance business. You collect money from many to pay to a few… So, if the claim outgo reduces, the overall premium reduces.”

Even policyholders benefit as the overall premium reduces. He added: “If you are taking care of yourself or have joined a gym, it would reduce the premium. However, the premium is not very expensive in India. So, the reduction would be insignificant from that perspective. The benefit you get by using the ecosystem the insurance industry has created is huge because the healthier you are, the happier you are, and the better your life is.”

Old age is a time when the body starts ageing and slowing down, and diseases and illnesses start rearing up their head. This is also the time when seniors are likely to spend the major part of their monthly expenses on healthcare needs. Therefore, taking adequate health insurance can go a long way in ensuring a stress-free life, without medical costs eating into one’s retirement kitty.


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