Differecne Between Indemnity Based Health Cover and Defined Benefit Health Cover - Over the past few days, various cell-phone users have been overruned with telephone calls or SMSs, urging them to purchase a new '3in1' plan from LIC of India. The plan provide health, life on top of accident cover. LIC Jeevan Arogya, a defined benefit plan, is similar to scheme floated by private life insurers. These plans hand out a lump-sump total amount upon hospitalization of the individual person.At the present the important difficulty is: should one go for this defined benefit plan from life insurance companies? To come across an answer, you would have to 1st educate yourself about the two options available to you to finance your healthcare correlated expenses -- security based
health covers, typically offered by general insurers, and benefit policies like Jeevan Arogya, generally from life insurance companies. PROTECTION -
BASED HEALTH COVER The most standard variety of health insurance in the country are the indemnity policies, regularly referred to as mediclaim. The policies typically cover expenses healthcare allied to hospitalization.The claims are frequently settled by the insurer either on a cashless basis through association with hospitals or by reimbursing expenses after the bills are submitted.Only hospitalisation-related expenses are acceptable under such policies, which means a variety of expenses, like commuting to the hospital, fall outside the purview of such
health covers. CLEAR BENEFIT PLANSEarlier health insurance plans were the sole preserve of general insurance companies. Although several life insurance companies have also now in full swing offering health plans.A numerous of these policies is in the nature of benefit covers, where the benefit is pre-decided. To be precise the insurance company pays a precise sum assured to customers when they make a claim. "The key advantage of benefit policies is that policyholders do not need to worry about claim settlement as they know in advance the amount that would be disbursed. Moreover the documentation system is simpler," A new advantage is that you can make a claim even if you have in the past been reimbursed by an indemnity policy for the same treatment In a benefit policy, the sum insured for the possible occurrence is paid no matter what is spent. Although, in an indemnity policy, one is only reimbursed the actual cost. A further advantage of fixed benefit products is that in case of any possible event, Policyholder can claim both from an indemnity based cover and a fixed benefit cover.The benefit plans don't insist on the original discharge docs to settle the claim. In that sense, a benefit policy or plan can be used as a top-up cover to take care of recovery expenses or make good the loss of salary due to temporary break in employment. The important difference between these two
health covers is the term of policy. typically, indemnity plans have to be renewed annually where defined-benefit plans are renewable after three years or more, depending upon the cover.
HOW TO DETERMINEAs you can notice both these plans operate on different planes. An indemnity plans or policies look after your hospital expenses either through a cashless facility or reimbursement, whereas the defined benefit plan pays you a exact sum despite your actual expenses. Hence what should you do? Get rid of indemnity plan? Or the other way around? If at all possible one should choose for a fixed-benefit plan along with an indemnity-based cover to completely address his or her health needs. Hence , a benefit policy can be used as a top-up cover. While the indemnity plan would pick up your hospitalization bill and the benefit policy will take care of the recovery expenses.CAN YOU MEET THE EXPENSE OF A COVER?If you are already close to fifties and are planning to get a health policy, you may have to shell out a bulky premium for the cover. Too the pre-existing disease regulation will hit you extremely hard as reimbursement plans don't cover pre-existing infirmity for first three to four years.If you don't have any financial restraint and can meet the expense of the heavy premium, you can select for a mediclaim. But you have to back it up with a emergency fund, which has to be built just for your healthcare expenses. At present senior citizens are more contented paying their personal expenses and do not want to depend on their children to avoid financial burden.Small and young savers can start off with an systematic investment plan and build a corpus over 20 years. That way they can benefit from the compounding effect even though the saving amount is you very lesser. If you are not a systematic depositor , invest the spare cash over a period of four to five months and direct that funds to building a healthcare fund. You can use your bonus or any extra savings to start of this corpus and make incremental contributions for a period of 4 to 5 months and freeze the money. That is a good proposition only and only if you are not servicing an expensive loan. Once you build the corpus, keep the asset allocations in one piece depending upon your age and risk appetite. You can have the funds for to have a high exposure to equity in your late 20s and early 30s. But it has to adjust more of debt instrument as you come near your 50s. As a final point save the corpus in the form of fixed deposits and liquid funds, given their stability and reliable nature. The cash is intact and can be made available within 24 hours even in case of crisis without any penalty.