Insurance Uncovered. Don’t mix life and health insurance

G Surendra

The objective of having a life insurance policy is to protect your family and dependants when you are not going to be around. But health/critical illness insurance policies serve a different purpose — paying your healthcare costs during your life time.

So, do not mix the two.

For life insurance, it is recommended that you buy a pure term cover. It can take care of your financial liabilities and serve as a legacy cover. For a sum insured (SI) of ₹1 crore (the thumb rule is life insurance has to be 10 times the annual income; so, decide accordingly), the premium on a plain-vanilla term cover may work out to ₹28,000/30,000. Max Life’s Online Term Plan Plus, HDFC Life’s Click2Protect 3D Plus (Life option) and Aegon Life’s iTerm and ICICI Prudential’s iProtect Smart are some options that you can consider, as these insurers have a good claim settlement record.

For hospitalisation cover, you need to buy a mediclaim plan. You can buy this as a family floater with your father included in it or take a separate senior citizen cover for him and buy a floater health cover for yourself, your spouse and two kids. Take a policy with no sub-limits. As you have older kids, look for SI restoration benefit. In policies with the ‘restore’ feature, if you exhaust the SI (and the no-claim bonus), the base SI will be restored. Apollo Munich’s Optima Restore, Religare Health’s Care, Cigna TTK’s Pro Health Plus, Max Bupa’s Health Companion and Royal Sundaram’s Lifeline Supreme are policies that have the restoration benefit. The premium for SI of ₹5 lakh for your family (floater cover with your spouse and two kids) will be ₹25,000 a year.

SBI Life’s Poorna Suraksha is a term plan with critical illness (CI) benefit.

If you want a comprehensive CI cover, this policy is not the right choice.

The policy works like this: At inception, the SI will be split in the ratio of 80:20 between the life and CI cover. Suppose it is a policy of SI ₹1 crore, the life cover will have a SI of ₹80 lakh and CI cover of ₹20 lakh. From the second year onwards, every year, the CI cover will increase by 5 per cent (of the original SI for CI cover), which is ₹1 lakh and, at the same time, the SI for life cover will reduce by ₹1 lakh. Depending on the policy term, the rate at which the CI cover increases will change. In case of detection of any of the listed 36 critical illnesses, the insurer will settle the SI based on the critical illness.

The company will also waive future premiums, though the life cover will continue for the remaining policy period. The advantage is also that unlike standalone CI policies from general insurance companies, here, the premium doesn’t change every year. It is fixed for the entire policy term.

However, note that there is a long list of exclusions under the policy. The policy excludes open heart replacement and kidney failure requiring regular dialysis, among others. It also doesn’t cover cancer of all types.

This defeats the very purpose of someone buying a CI cover.

If you are looking for complete CI protection, disease-specific plans will be better as they have minimal exclusions. Some policies to name here are ICICI Pru Life’s Heart/Cancer Protect (that gives protection for both cancer and heart ailments) and Max Life’s Cancer Insurance Plan. There are also plans specifically to cover diabetes.

On cost basis too, the disease-specific CI plan works out better. Sample this:

The cost of ₹1 crore SI cover from SBI Life’s Poorna Suraksha will be ₹62,000 a year (as at one point, the policy will provide a cover of ₹60/70 lakh for CI). But if you take ₹1 crore SI term cover (cost of which is ₹30,000) and a standalone CI cover for ₹20 lakh from ICICI Pru Life’s Heart/Cancer Protect (cost of which is ₹20,500), your premium outgo for a full year will be around ₹50,000.

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