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The debate on whether health insurance is safer in the hands of life companies or general insurers has been on since quite some time in India. Today, a host of non-life and life companies, including public sector behemoth Life Insurance Corporation (LIC) offer health cover to individuals. While the non-life companies continue to dominate the health space, this does not mean that they have had a smooth sailing all along, having been beset with loss-making health portfolios. The recent withdrawal of cashless facility at some of the 'five-star' hospitals by public-sector general insurers points to the underlying problem. The insurers have cited exorbitant rates that patients have to cough up for a health cover as the reason for the withdrawal. Though many such hospitals are now back in the fold, the episode may have got some policyholders thinking about viable alternatives. In this backdrop, perhaps, the debate warrants a revisit.

"The world over, it's mainly life insurance companies that look after the health insurance segment. Then, there are standalone health companies. It is only in India that the health domain is managed primarily by non-life insurers. We believe that life companies are better suited to handle this sector," says Sudhir Sarnobat, CEO, Medimanage Insurance Brokers. So, what are the kind of products on offer from life insurers? They come in two variants - benefit policies and reimbursement policies (which are based on the principle of indemnity). The latter category is similar to the one provided by the general insurance companies in that they offer to reimburse the actual expenses incurred by the policyholder in the event of hospitalisation. Health companies too offer cashless facility through their network hospitals. Again, the procedure for making a claim is identical to that of non-life insurers and the policyholder is required to submit the relevant documents. Under benefit policies, a pre-fixed lump-sum amount is paid out to the insured once the claim is made. LIC offers a benefit policy with an in-built investment component.

Also, health policies offered by life insurers are more long-term in nature, with the tenure going up to even 20 years. Unlike those from general insurers that are renewed annually (which means the chances of premium rising every year are high), here the premium is fixed for a certain number of years. "Nobody can offer a life-long guarantee that premiums will not increase, but they will remain fixed for three-five years in these policies," points out Sarnobat.

The Negatives:

For one, very few life insurance companies design health covers (that is, reimbursement policies) comparable to the ones offered by general insurers. Moreover, their premiums could be relatively higher too. "Due to more stringent underwriting policies, health premiums charged by life companies tend to be higher," explains Sarnobat. For instance, annual premium payable by a 30-year-old seeking a 5-lakh cover under ICICI Prudential Life's MediAssure classic plan is 5,762, while the figure drops to 5,410 in case of New India Assurance's individual mediclaim policy.

You also need to keep an eye on exclusions, sub-limits and waiting period (when pre-existing illnesses are not covered), like in case of any health cover. Though such policies promise renewability guarantee, some could introduce sub-limits. For instance, HDFC Standard Life's SurgiCare plan stipulates that if the total payout reaches 300% of the sum assured, the policy could be terminated.

This apart, if you opt for fixed benefit policies that hand out daily hospitalisation cash benefits, the onus of estimating the possible healthcare costs rests with you. It may be difficult for a layperson to determine the cost of treatment on a per-day basis. The pre-defined claim amount will reach you without your having to face too many hassles, but if you have erred on the lower side while calculating your expenses, you will have to foot the bill for the balance. However, in case the pre-defined benefit exceeds the actual cost, the remainder will be disbursed to you.

Also, under the benefit plans that cover critical illnesses, the contract comes to an end once the lump sum is disbursed. Should the need arise in future, you may find yourself without cover, as other companies may refuse to cover the illness or bring it into the coverage ambit only post the conclusion of the waiting period (around two-four years, depending on the company and the policy). Though it is important to buy critical illness covers, it should be an add-on to the basic health policy that covers wider risks.

Making The Right Choice:

Before taking a decision, you need to take into account several factors, the key one being the sum insured that you will require. Now, this depends on your age, the city of your residence, your health, your work environment and finally, the quality of hospitals you would prefer to go for treatment. Typically, those under 30 years of age will need a cover of at least 3 lakh, while a minimum of `5 lakh will be required by those on the other side of 30. Senior citizens should look at as large a cover as possible and preferably, dedicated policies. The next step will be a comparison between the features of health covers offered by life and nonlife companies. Some financial planners reckon that one should go for a basic cover from a general insurance company, and budget permitting, enhance the total health cover by opting for a fixed benefit policy. The hassle-free claim processing in case of the latter would ensure peace of mind to the insured.

"In case of a fixed benefit policy, you can make a claim even if you have already done so under your policy from a non-life company," explains Pradeep Pandey, vice president, health, Aegon Religare Life Insurance. Therefore, the lump sum can be used to replace income lost during the period of treatment and recovery. Do bear in mind that if you decide to opt for a reimbursement cover from a life insurance company, in addition to one from a general insurer, you will not be able to claim the entire expense incurred from both the policies - the two companies will contribute the amount in the ratio of the sum insured.

To ensure that your health cover is comprehensive, you can also consider incorporating a critical illness plan in your portfolio. The amount is paid upon the diagnosis of the disease and not after hospitalisation, providing a cushion if the need arises for meeting resultant expenses as well as lifestyle modifications costs. Also, the end-use of the lump sum is not tied to your illness, giving you the freedom to spend it the way you choose.