Why we purchased a 2nd set of base & super top up health insurance policies

Published: May 23, 2021 at 10:27 am

Last Updated on May 23, 2021 at 10:27 am

This article discusses why we purchased a second set of base health insurance and super top-up health insurance. Regular readers may be aware we hold a United India Health Insurance policy from 2006 and have so far made four claims with it. It has so far helped me at the time of need (two cashless and two reimbursement claims), but it comes with a major limitation.

Room rent sub-limits. This essentially means that the cost of the daily room rent and daily ICU rent and associated expenses will be capped at 1% of the sum insured (room rent) and 2% of the sum insured (ICU rent). The problem is that the following charges depend on the room and ICU rent -extract from United India Gold policy wordings.

  • Nursing Care, RMO charges, IV Fluids/Blood Transfusion/Injection administration charges and similar expenses. Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialists Fees.
  • Anaesthetist, Blood, Oxygen, Operation Theatre Charges, surgical appliances, Medicines & Drugs, Dialysis, Chemotherapy, Radiotherapy, Cost of Artificial Limbs, Cost of Prosthetic devices implanted during surgical procedure like Pacemaker, orthopaedic implants, infra cardiac valve replacements, vascular stents, relevant laboratory diagnostic tests, X-ray and such similar expenses that are medically necessary

That is practically everything else (aside from medicines and implants)!! We started with three lakhs cover in 2006, and to ensure our room rent choices do not fall outside of these sub-limits, we have been increasing the cover every year! We still lost some money because of this recently.

Disclaimer: I am writing this article only because I disclose all things personal finance to readers. No part of this article should be treated as a recommendation or suggestion to buy health insurance. Kindly appreciate that insurance purchase, particularly health insurance is deeply personal and generic solutions will not work. The system of insurance presented below is expensive. Although I can afford it, I do not complain because health insurance is a hedge against repeated net worth erosion. I do not claim that the insurance choices are the “best” or “ideal” for my family. We live and learn.

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What we hold currently. Rs. 5.5 lakh cover for my mom (75). United refused to increase the cover, plus a United Super top-up for Rs. 15 lakh with an Rs. 5 lakh deductible. This is a reasonable sum for her age.

Rs. 10 lakh back cover individually for me (46), wife (44) and son (11) and a floater Rs. 15 lakh super top-up (both from United) with an Rs. 5 lakh deductible. The sub-limits was a major reason why we had to increase the base cover beyond the deductible.

While writing this post, I sat down to compute the 2020 total premium for all of the above: Rs. 91 thousand! It might hit 1L when we renew in a couple of months. I do not mind the cost as much as I mind the sub-limits.

However, I also have a deep-rooted mistrust of corporates dealing in insurance (and health). I did not want to port the policy to a private insurer because of this. I believe private health insurers in India have not been tested enough in terms of claim payouts.

I believe the logic is the same as the TER of mutual funds. Keep it low and invite the AUM, and then jack it up. IRDA only prevents the insurer from hiking the premium of individuals. So they hike it for everyone in the insured pool citing poor claims experience.

Also, private insurers are extremely picky on who they will insure. Those with pre-existing diseases (PED) or senior citizens will find it difficult (if not impossible) to get a policy.  This rules out porting for two in our family. My mom with Parkinson’s, and I with Myasthenia Gravis and hypertension. Rs. 60K out of the 91 K premium is for the two of us, which will not change.

So I decided against porting and decided to get a second set of base health cover and super top-up cover without sub-limits for my wife and son and, if possible, for me. How should I go about this? DIY or buy it through an intermediary?

Regular readers may know there are plenty of DIY resources at freefincal to choose health insurance, both by other contributors and me.

However, as discussed before, buying health insurance is the most difficult decision in personal finance, and I was too mentally tired to choose another health insurance. All private insurers look the same to me. Thankfully, I knew Deepak Mendiratta of PlanCover. We met during the Delhi DIY investor meet and corresponded over email since. Deepak has helped many families get medical cover and has also favourably resolved complicated claims. His competence is regularly on display at FB group Asan Ideas for Wealth (AIFW). The webinar and article maked by arrows are by Deepak.  Please note: we are not affiliated with Plancover in any way. 

Besides insurance, Deepak has a deep understanding and experience of health conditions and claims. This will come in handy in case of claim disputes. So I told him I want a second set of base and super top covers, and my only requirement was “no sub-limits”.

Since I had a PED, we decided to get a floater cover for my wife and son and a separate cover for me (this is not done yet). What we got:

Future Generali Health Total Plan for 10 Lakhs for wife and son with a voluntary deductible of Rs. 50,000. Deepak recommended the optional deductible, perhaps to increase the chances of acceptance and keep costs low. This means, for any hospitalization, the first 50K expenses we have to pay (or claim from elsewhere). This is a reasonably acceptable “loss” for us.  Total premium: Rs. 11, 500 (this entirely depends on the applicants).

Liberty Health Connect Supra Super top-up policy for one crore (floater)with a 10 lakh deductible for wife and son. Premium is Rs. 1400. Why is this so low? Because insurance is a game of probability. The insurer is betting that very few hospitalizations would cost more than 10L, and even fewer would touch one crore. Health insurance purchase would be easier if we, the buyers, also play this game.

Since the super top-up is from a different company, the claims would most likely be settled via reimbursement. This is a hassle, but as long as your liquid networth is higher than the policy amount, I am willing to play the odds.  The total premium (entire family) for the health policies (excluding the employee cover!) is above one lakh. It is important to keep the future increase of this amount in mind while planning for retirement.

Let me conclude with a warning. Health insurance is largely a loss-making business. The higher the market share of the company, the more claims they payout. This is why privates are careful about who decide to insure. This is why private players keep talking about “incentives for staying healthy”.

They want the insured to stay fit and healthy so that the chances of repeated hospitalization in the insured pool is lower. So they offer us some peanuts as an incentive. Deepak has always warned about choosing a company that insures indiscriminately. This would hike our premium in the future. Sadly the PSUs are a glaring example of this.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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