The Insurance Regulatory and Development Authority of India (IRDA) has come up with a new health insurance product to speed up the penetration of health insurance in India. The product will be launched soon in the insurance market. The product is expected to cater to the needs of the people living in rural and semi-urban areas.
Normally, two options are available for a person who wants to buy a health insurance cover. Either he/she can opt for an indemnity plan or for a critical illness cover. An indemnity plan covers hospitalization expense of the policyholder while a critical illness plan provides cover against the treatment of particular critical illnesses mentioned in the policy. A critical illness cover repays the sum assured to the policyholder who can use it for a variety of purposes.
New health savings plan suggested by IRDA:
The new health savings plan designed by IRDA carries the same features that an endowment life insurance plan has. However, the only difference both is that the cover offered by the new health insurance policy can be used only for covering medical expense. Also, this new plan will come with a savings component which makes it different from regular insurance plans. The plan will provide cover only for health related expenses. The policyholder will get an account with this plan wherein he/ she can save money for future medical expenses.
The suggested health savings account will provide interest on your savings. However, you cannot use this account like your normal savings bank account. For this health savings account, premiums will be divided into three components. The first component of premium will be for risk charges for health insurance, the second component will be for expenditures, and the third will be for savings component. You will be able to renew the health insurance cover offered by the plan. However, the risk charges may vary at renewals. Premiums paid under this health insurance plan will be exempted from income tax under section 80D of the Indian Income Tax Act. You can get tax exemption up to Rs. 20,000 every year.
The plan will help you save and get cover for your medical expenses. The investments made by you with this plan will grow over the years, and you will be allowed to withdraw your savings at maturity. However, you will be allowed to withdraw savings only to meet your medical expenses.
Risk coverage by the plan:
The plan will basically function like a top up plan. For example, if you have a health cover of Rs. 3, 00,000, and you exceed that amount, the plan will provide you with extra cover. Also, the insurance provider may choose to provide cover for specific critical illnesses which are not covered by regular health insurance policies.
Know the charges:
This new health insurance savings plan requires a minimum investment of Rs. 25,000. The plan is likely to have a three-year lock in period. Also, 15% of your annual premium will be paid as agent commission in the first year. Going forward, it will be 10% in the second year and 5 % in the third, fourth and fifth years.
No doubt, this new health savings plan will help you save money for your emergency medical expenses. But, there are a few limitations which we cannot overlook. Firstly, the savings done through this plan could be used only for medical emergencies. Secondly, as the minimum premium charged by this plan is Rs. 25,000, it will be difficult for common people to afford and reap the benefits of this new health insurance plan. Compared to what you pay for a regular health insurance plan, this new health insurance is expensive. With a regular health insurance plan, you can get coverage up to Rs. 5, 00,000 by paying an annual premium of Rs.5,000.
