What life plans offer

Life insurance plans, be it pure term or savings-oriented products offer two types of health riders — Critical Illness (CI) rider and Hospital Cash Benefit rider.

A CI benefit is a lumpsum paid when the insuree contracts any of the illnesses listed in the contract regardless of actual expenses incurred. It does not pay for any other expenses relating to the illness. The catch lies in the structuring of the payouts and the base policy's status thereafter.

Accelerated benefit

The benefit payable can either be an accelerated or standalone one. If it is an accelerated benefit, a portion of the sum assured (usually up to 50 per cent) is advanced on contracting an illness and the basic sum assured (SA) gets reduced to that extent. If the insuree dies thereafter, the nominee gets only the remaining SA (after reducing the CI claim). This is the case with ING Vysya Life, ICICI Prudential and Kotak Mahindra. This is sub-optimal as a reduction in risk cover is hardly what an insuree will be looking for.

Further, in the case of ICICI all other rider benefits cease. For instance, if you had taken a term cover (which gives you an amount equal to the basic sum assured on death), on receiving a claim under the CI rider, you are not entitled to any claim under the term rider.

In ICICI's savings-oriented plans, such as Secure Plus, Cash Plus and Secure Plus Pension, the life cover also terminates along with all riders on receiving a CI claim. Therefore, the policy ceases to be an insurance plan and continues only as a savings plan with the value continuing to accumulate. In the case of Kotak Mahindra's savings products, the CI claim paid is also proportionately deducted from the policy's accumulation fund (the value of your savings where your premiums and interest thereon are credited and expenses and risk premium deducted). After the payment of a CI claim, the future premiums are reworked on the reduced SA.

Allianz Bajaj, however, pays a standalone CI rider and the maximum SA under the rider is equivalent to the basic SA. Payment of a CI benefit under its products does not reduce the payment of benefit under the base policy.

Hospital Cash Benefit

The Hospital Cash Benefit usually reimburses only room charges, and does not cover all hospital expenses. A Major Surgical Illness rider provided by ICICI Pru gives a lumpsum of up to 50 per cent of the SA, depending on the degree of the ailment.

The benefit can be received any number of times provided it does not exceed the maximum amount eligible and the illness has not been treated earlier.

Premiums

One common sales pitch is that premiums for a health rider is constant and based on the age at entry, and that for standalone health cover it is on one-year renewable basis. The premiums for a health insurance cover increase with age and can range between Rs 2,000 for a 25-year-old to Rs 30,000 for a 60-year-old. If you were to opt a health cover on a one-year basis, you may end up coughing up an exorbitant sum in the later years of your life.

If you look at the fineprint, you may notice that rider premiums too are not constant. In most policies, premiums are subject to renewal after five years. For instance, Allianz Bajaj's rates for Hospital Cash benefit are renewable on a yearly basis and that for the CI rider is guaranteed only for five years.

In ICICI Pru, the SA under the rider is adjusted accordingly for the revised premium if you do not want to pay more. In the case of market-linked plans, the premiums are on one-year renewal basis. In reality, you may not get the benefits of a constant premium if you opt for a health rider.

Benefit period

Another catch is the period for which the benefits are available. Usually, rider benefits are available only for the premium paying term.

They are not available with single premium polices, the exception being Birla Sun Life. ICICI Prudential too offers the benefit of a CI cover with its "Forever" plan for 10 years after the premium paying term or up to age 65, whichever is earlier.

Coverage

The quantum of coverage under a rider is limited, as rider premiums cannot exceed 30 per cent of the basic policy premium.

Therefore, these benefits may not be available if the policy term is longer or if the SA is low.

Health insurance cover

A health insurance cover on the other hand, is comprehensive. It covers hospitalisation expenses due to an illness or an accident, 30 days pre- and 90 days post-hospitalisation expenses, and also expenses for a surgery.

Plans, such as Tata AIG's "HealthFirst", pay a flat sum regardless of your medical bills.

In addition, you can extend the cover to your family members by paying a nominal extra premium.

You can opt for add-on benefits such as "Education Allowance" for your children and "Family transportation" (re-imbursement of the actual transportation expenses incurred by an immediate family member to reach the insured person) on payment of an extra premium.

The services offered by non-life companies in terms of claim settlement are superior to those offered by life insurance companies. You can take the cash less facility if you are treated in any of the hospitals approved by the insurer — a boon in such situations.

Life insurance companies reimburse the expenses only after you have paid for it in the case of Hospital Cash Benefit riders. A plain life insurance policy complimented with a comprehensive health cover such as `Mediclaim' will provide wholesome protection to you and your family.

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