Yahoo
2 April 2008

In recent times, there has been growing awareness about life insurance products and the various benefits they offer to individuals. Offerings like unit linked insurance plans (ULIPs) have done their bit to draw individuals towards the insurance segment. Also tax benefits (presently under Section 80C of the Income Tax Act) have contributed to their allure and helped in popularising insurance products.

Conversely there are products like medical insurance (or mediclaim as it is commonly referred to), which can add value to an individual's insurance portfolio, but are relatively lesser known. In this note, we discuss what medical insurance is all about and the various benefits it offers to individuals.

What is medical insurance?
Medical insurance provides for reimbursement of hospitalisation expenses for illnesses/diseases suffered or accidental injuries sustained during the policy period. In other words, subject to the insurance cover and the terms and conditions of the policy, the insurance company undertakes to compensate the policy holder for hospitalisation expenses that he incurs, during the policy’s term.

To avail of the insurance cover, the policy holder is required to pay a premium. The premium amount depends on factors like the policy holder's age and health. The premium amount rises in line with an increase in the insured's age, among other factors. In case of an existing policy, wherein an insurance claim has not been made, the insurance company compensates the policy holders by offering a higher insurance cover (at the same premium) or by lowering the premium for the subsequent years.

Premium amount
The table below provides an indicative list of the premiums from a leading insurance company for its medical insurance policy for a cover of Rs 100,000.

Age (Years)	Indicative Annual Premiums (Rs)
25 – 35	1,470.34
36 – 45	1,599.42
46 – 55	2,288.57
56 – 65	2,606.21
66 – 70	2,916.00
71 – 75	3,124.76
76 – 80	3,866.67

(Inclusive of Service Tax charged at 12.5% and Education Cess charged at 2.0%)

Added benefits
Insurance companies are known to offer discounts in premiums when members of a family opt for medical insurance together vis–a–vis applying for insurance in their individual capacities. Generally, most policies cover upto 30 days of pre–hospitalisation and upto 60 days of post–hospitalisation expenses, however an additional cost might have to be borne for the same.

Most insurers also provide the facility of cashless hospitalisation by tying up with third party administrators (TPAs). In other words, policy holders can avail of medical treatment without incurring any expenses during hospitalisation. Conversely, they would be required to undergo medical treatment at their expense and subsequently file a claim with the insurance company.

Tax benefits
Medical insurance premium paid is eligible for a deduction from gross total income under Section 80D of the Income Tax Act. At present, the eligible amount is Rs 10,000, in case of senior citizens, the same is Rs 15,000. From the financial year 2007–08, the eligible premium is Rs15,000. In case of senior citizens, the same is enhanced to Rs.20,000. The premium payment has to be made by cheque, to keep in force or effect the medical insurance.

Merits of taking medical insurance at a young age
It is best to take medical insurance at a younger age, when the insurance seeker does not suffer from any ailments or sicknesses. This is important because as one ages, there is a greater likelihood of developing ailments. Existing ailments are not covered at the time of opting for medical insurance. Hence it would be prudent to opt for the insurance cover at an early age. Furthermore, taking a policy earlier can also save the trouble of undergoing a medical check up.

Also given that insurance companies have increasingly started giving senior citizens a cold shoulder (which is ironical given that most individuals need hospitalisation/medical treatment at that age), it makes sense to start early.

Finally, we present a check list of points to be considered while buying medical insurance:

• Check for the ailments/diseases that are excluded.
• Check whether expenses arising for treatment due to war, riots or a terrorist attack are covered.
• Check the ailments that will not be covered in the initial years of the policy.
• Check if cashless hospitalisation is included and also the number of hospitals where this facility can be availed.
• Enquire about the compensation provided in case of partial or total disability.
• In case the medical insurance policy is for dependants like parents, check the maximum entry age.
• Ensure a complete understanding of the benefits accrued, in the event of no claims being raised.