Should I buy personal health insurance if I have company health cover?

A question that is often asked is, "should I buy a personal health insurance policy if I have a company health cover?" The standard answer to this* was, "yes, you should, as you could lose the company cover at any time".

* The answer if often laced with conflict of interest as the guys who say, "yes, you should" are associated with insurance companies.

The reason I would like to re-open this discussion is because of IRDA portability rules that state that individuals (along with family members) part of a group policy can shift to a personal health cover (individual or floater) offered by the same insurer. See section 10.2 here

We saw an instance of such a shift in yesterday's post by Mr. Srinivasan Sundarajan: Group Insurance Portability to Individual health insurance cover.

Does this mean that I do not have to get personal health cover since I am covered by company cover? Does this mean that all I need to do is to get a super top up family floater over the company cover?

In an ideal world, the answer is yes (assuming that the company can always afford the group health cover). In a practical world, I am afraid, the answer is a no.

There are three reasons for this:

1:  Corporate employees can be laid off: And such lay offs can be sudden. A group health cover requires us to interact with the company HR division. Will the HR division assist in a switch in case of a lay off? The group cover may still be extended for a while, but can a switch happen then?

This a grey area, at least to me. If someone can provide some information on this, it would help.

2: Health insurers are refusing the switch: Mr. Sridhar Vetapalem messaged me that many insurers are saying a switch from group cover to private health cover is not possible! This is incorrect. A switch is very much within the nearly 5-year old rule and of course, we saw the real life example of Mr Sundarajan.

The problem is, if health insurers refuse the switch, an employee cannot fight them directly. The HR will have to help. Will they?!

Group insurers can change from year to year. So a switch-friendly may be replaced by a switch-unfriendly insurer when we wish to apply!

3: Beware of underwriting rules! As pointed out in Health Insurance Portability: What you need to know before porting, portability is not a right and can be refused.

The switch request can be denied after accepting the request and assessing the risk for the insurer. As mentioned above. the problem now is that many insurers are refusing outright, saying it is not possible. This is incorrect.

Assuming that the insurer accepts the switch request, the age of the people covered will be an issue. As pointed out by Mr. Sundarajan, his mothers cover reduced from 10 lakh in the group cover to 3 lakh in the private cover.

There is no need for the insurer to offer the same level of cover as in the group policy because underwriting rules apply.

If any of the applicants have pre-existing diseases, the switch can be denied.

Therefore, assuming that company cover with a super top up is sufficient can be dangerous. When we leave employment, we may either not have a base cover or a reduced one.

Therefore from a practical point of view, buying a small private cover while young and in employment still seems like the way to go. A super-top up can be included depending on affordability (that in turn decides the deductible).

What do you think?

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7 thoughts on “Should I buy personal health insurance if I have company health cover?

  1. Deepesh

    You are right, Pattu.
    Even by definition, portability is merely credit of waiting period already served. Nothing more. Insurer can refuse to issue cover or hike premium.
    Portability, in my opinion, is only for young and healthy people. There will always be a few exceptions though.
    To not purchase a personal cover, hoping that you will be able to port to a personal cover later, is not a wise approach.

    Reply
  2. Paul

    My wife works as an HR Head for an MNC in India and even she couldn't do the switch from group to personal medical insurance the last time she changed jobs.

    Her Insurance Broker showed no interest in responding to her once she found out that my wife was serving notice. Her group cover at that time was with National Insurance and in hindsight it was good that we couldn't do the conversion as I figured out later that National had a whole host of restrictions that do not exist in their group cover including if I remember correctly, paltry room rent, co-pay and so on. Group cover works very differently as they change the premium every year depending on the claims the previous year and I think there are very few insurers in that sector.

    Reply
  3. Sundararajan Srinivasan

    The most important thing to do is to ask this question right at the beginning, about the ability to port the policy. So at least it allows you to know what is possible or not.
    The other thing to look out for - is when your company switches the insurer (which can happen).
    As most of them have pointed out, this is not yet in a perfect state - where you should be automatically entitle to switch the policy from group to individual/ family floater. Till such time we can get IRDA to mandate this (as different from porting it to a different insurer), this will have uncertainties.

    Reply
  4. Lokesh

    Had I known this few years back, I could have saved a lot on hospital expenses. I switched employer without considering this benefit and currently I neither have insurance for my dependents under group insurance nor can I take one because it is being rejected.

    Just as "starting early" with investment pays off, "having health insurance early" will save potential expenses towards hospitalization

    Reply

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