Group insurance policies provide limited coverage; may not be fit for certain illnesses or health conditions
The health insurance industry has consistently played a pivotal role in providing a financial cushion to high healthcare costs. A robust health insurance policy provides health benefits and security at all times, pandemic or not. One can rest assured about their financials during these uncertain times with sufficient coverage.
It is essential to have an appropriate health insurance policy that offers sufficient coverage for self and family. Taking this measure while planning your finances will help alleviate the requirement to pay a significant amount of out-of-pocket money due to hospitalisation expenses. The hospitalisation costs in India are increasing at a rate higher than price inflation. Treatment of critical illnesses, chronic ailments, and the like will result in a financial burden without a suitable policy.
According to the Longitudinal Ageing Study in India report 2020, the proportion of the working-age population (15-59 years) is projected to rise to 62% by 2050. This statistic suggests that there could be a significant rise in people under the salaried class. A substantial number of salaried individuals are likely to rely on only an employer-provided group health policy rather than investing in an individual health insurance policy. However, it is necessary to note that these group insurance policies provide limited coverage and might not be fitting for certain illnesses or severe health conditions.
A solution to this would be holding an individual health insurance policy irrespective of your employer’s group health cover. Here are some compelling reasons for investing in a personal insurance policy:
Employment Status: One can avail of the benefits of their employer-provided health insurance cover only until they are working for that employer. Your policy is rendered invalid once your employment status changes. Resignation or termination from one’s job can lead to a change in the employment status. If an unforeseen health situation arises while you are in between employment opportunities or on a sabbatical then you will be unprotected and won’t have a health insurance policy as a safety net. An individual cover will protect you despite your employment status.
Differing Healthcare Needs: A group health policy provided by one’s employer has a standardised sum insured for all the employees and their families. Your health care needs might vary from that of your co-workers; hence, an employer’s health insurance coverage may not provide sufficient protection for you and your family. Ideally, the sum insured is calculated based on personal factors such as age, medical history, family structure, etc. An individual health insurance policy provides a custom-made approach by taking into consideration of these factors.
No Legal Ramifications: A group health insurance policy provided by the employers is one of the many incentives offered by them to entice and retain the employees. The employer will not face any legal ramifications if they decide to take away or reduce your group health cover benefits. This move can prove detrimental to your finances if you are incurring hospitalisation expenses while your company stops paying premiums.
Insufficient Protection: The total effective coverage provided by a corporate policy is likely to cover only 50 – 60 per cent of one’s healthcare costs due to the low amount of cover, parental co-pay, sub-limits etc., which does not provide sufficient financial support to the policyholder.
Safety of Your Dependants: One of the crucial reasons for buying a health insurance policy is the extended coverage to the dependants. Employer-provided health insurance may or may not cover your dependents or might only cover X number of family members. For example, employer-provided policies may cover four dependants, i.e., spouse and children but might not include parents. Since older dependants are more likely to need a health insurance cover, this limitation proves to be a setback.
Bonus Not Portable: One can switch individual health insurance policies, and the bonus added would be portable. However, an employer-provided group insurance cover does not afford you the same convenience.
Tax Benefits: Health insurance premiums are tax-deductible under Section 80D. Corporate health insurance does not provide this benefit.
There are several other reasons why a corporate health insurance policy should be considered a secondary cover to an individual health policy. Further limitations include co-pay clauses, room renting limitation clauses, no coverage post-retirement, etc.
Looking at the advantages of an individual health insurance policy, it is advisable to invest in a personal health policy that takes care of your healthcare needs sufficiently and to treat a group health policy as a backup or additional cover. Doing so will allow you and your loved ones to have adequate coverage and financial protection which is a very desirable asset to have during these uncertain times.
The author is Chief Actuarial Officer, Aditya Birla Health Insurance
DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.