Medical issues are inevitable part of life but the cost of treatment often takes a toll on the family. For this reason, health insurance is an insurance you must have. To keep yourself and your family members well protected get the best medical insurance by keeping the following facts in mind.

What types of insurance is being provided?

Does your health insurance cover provide only reimbursements or also cashless treatment? This is one of the most crucial questions you must ask yourself before purchasing insurance. As the name suggests, in case of reimbursement the insured needs to pay for the treatment and then submit the medical bills to the insurer to get the money back. In case of cashless treatment the insurer takes care of all the expenses when the insured is hospitalized.

Is the insurance well networked?

Instead of reimbursements what we need more during medical exigencies is cashless treatment. So choose a health insurance company which has a wide range of network with standard hospitals and nursing homes around the country.

Is the health insurance right for you?

There are multiple medical insurance schemes available in the market and it is utmost important that you choose the right policy. If you are single opt for the personal health insurance; there are policies to cover the whole family or provide individual protection to the family members. The health insurance claim amount generally ranges between Rs. 1 lakh to Rs. 5 lakh; choose one after considering not only the present condition but also keeping in mind the fact that the cost of treatment will rise in future.

Are there any additional protections?

Pre and post hospitalization expenses are the standard items covered under the health insurance policy. Check whether your mediclaim policy covers additional expenses like maternity and new born expenses or costs related to day care procedure. There are special insurance schemes which cover expenses when any critical illness is diagnosed.

Is the premium affordable?

Health insurance policy is just not a matter of a year or two; it is a matter of whole life. For this reason choose an insurance policy with an affordable premium. Some companies also offer additional benefits like discounts on the premium if it is for multiple years. If there is no claim made in a year then many insurance companies even allow a certain percentage of the claim to be carried forward to the consecutive years. One of the premium factors on which the health insurance depends is on the age of the insured, addictions, BMI etc.; if the age is more the premium will be more. For it is advisable that you start a health insurance at an early age. At present, the health insurance plans available in India range in Rs. 5000 to Rs. 50,00,000, depending on the number of diseases covered. The family floater plans are usually more expensive than the individual plans.

So do not let medical expenses create more stress in your life. Get a perfect medical insurance today and stop hassles of last minute cash arrangements.

Ms. Pooja, a 42-year-old professional, was walking home after work when she suddenly suffered from a heart attack and had to be taken to the hospital immediately. Though she survived the attack, she had to undergo an angioplasty. The doctors informed her that the cost of the angioplasty was around INR 1 lakh. While Ms. Pooja was covered under a mediclaim policy, it did not offer coverage for the surgery. Her family members had to make last-minute arrangements for funds to meet her treatment costs. Pooja was not only worried about her recovery, but was also burdened under the financial debt of exorbitant medical bills.

Like Ms. Pooja, many are unaware that basic health insurance plans do not provide coverage against critical illnesses. You, therefore, have to make out-of-pocket expenses towards the treatment of the same. A simple solution to such an issue is to avail of coverage under a critical illness policy.

About critical illness policy

Critical illnesses refer to life-threatening diseases such as kidney failure, heart attack, stroke, cancer, and permanent paralysis, among others. A critical illness policy is an insurance product that offers financial protection against such dreaded diseases. The insurance provider is liable to pay a lump sum amount upon diagnosis of the any of the critical illness as mentioned in the policy document.

Reasons to invest in a health insurance policy that includes critical illness

The benefits of purchasing a critical illness coverage are numerous. Following are six major reasons why you should purchase such a policy at the earliest.

1. Provides financial security

Since the insurance provider offers a lump sum amount upon diagnosis of the disease, you may meet the cost of your treatment rather easily. You do not have to deplete your life savings or suffer from a major monetary blow. You may also use the lump sum amount to cover numerous other financial obligations, like lifestyle expenses, travel expenditure in case treatment is to be received at a far-away location, repayment of an existing debt, among others.

2. Offers coverage against medical inflation

Medical inflation in India has reached a high of 13% to 15%. Private hospitals charge around INR 1.25 lakh to INR 2 lakh for an open heart surgery. The expenses incurred towards a valve surgery is even higher, with the cost ranging anywhere between INR 2.5 lakh to INR 2.75 lakh. Besides, the cost of diagnostic tests can be financially burdensome as well. For example, coronary angiography, which is a test that displays the insides of the coronary arteries, costs around INR 10,000 to INR 15,000. A critical policy comes to your rescue against rising medical costs. You may avail of quality treatment and focus on a speedy recovery by utilizing the lump sum amount received to pay for your treatment.

3. Acts as income replacement

Diagnosis of a critical illness may affect your ability to work. You may be unable to generate income, for a temporary or even a permanent basis. Besides, your family will be left in a financial crunch if you are the breadwinner. You may, therefore, buy health insurance to ensure that your financial needs are taken care of even if you have contracted a critical illness. The salary that you used to draw from your workplace may be compensated through the sum assured amount offered by the insurer.

4. Supplements your employer insurance

It is important to note that employer group policies generally do not cover critical illnesses. Additionally, you may lose insurance benefits if you switch the company or quit your current job. Opting for a critical illness cover, therefore, supplements your employer insurance policy while providing critical illness coverage at the same time.

5. Ensures lower rates upon early purchase

The risk of contracting a critical illness is lower while you are young. Insurers perceive you as a low-risk individual and offer the benefit of low premiums when you invest in health plans early in life. Since the cost of premiums depends on age, you may consider investing in a critical illness policy as early as possible. Additionally, you may enjoy higher sum insured if you are in a lower age range.

6. Provides general tax benefit

Premiums payable towards your policy is allowed as deduction from your taxable income. Section 80D of the Income Tax Act, 1961, offers tax benefit in this regard. You may avail of tax benefit up to a maximum limit of INR 25,000 on premiums paid for self, spouse, and dependent children. You may claim an additional deduction of INR 25,000 towards premiums paid for covering your parents (if your parents are not senior citizens). If you are above 60 years of age, you may claim a higher tax benefit of INR 50,000. Besides, covering your retired parents will fetch you an additional INR 50,000 tax benefit. This means that you may usurp total tax benefit of INR 1 lakh (INR 50,000 + INR 50,000). Reducing tax liability is, therefore, one of the numerous health insurance benefits.

It is rightly said that health is wealth. You may protect your health by investing in a health plan that covers critical illnesses. By doing so, you may receive the much-needed financial support during challenging times.

There is often some confusion associated with Unit-Linked Insurance Plans [ULIPs] and Equity-Linked Savings Scheme [ELSS]. Both these financial instruments are eligible for tax benefits under the Income Tax Act.

However, there are some differences between these products and it is important to understand these before you make an investment decision. Here are five such differences.

1. Life coverage

ULIPs are insurance plans that combine life cover along with investments. A portion of the premium may be invested in various products such as debt, equity, money market, or hybrid instruments. The minimum sum assured is ten times the annual premium, which is seven times if you are over 45 years old at the time of investing.

In comparison, ELSS plans are diversified equity schemes that primarily invest in the stock markets. Unlike ULIPs, ELSS plans are only investment products and do not provide any life cover.

It is important to clearly understand your personal needs before you decide to invest in either of these two products.

2. Taxability

Investments made in a ULIP plan or ELSS plan are eligible for tax deductions under section 80C of the Income Tax Act. The deduction is limited to a maximum amount of INR 1.5 lakh per annum.

ELSS plans fall under the EEE [Exempt, Exempt, Exempt] category. This means the investment amount, the earnings thereon, and the maturity proceeds are also exempt from taxes. The minimum lock-in period for ELSS plans is three years.

Investments made in ULIPs are eligible for a tax deduction when you remain invested for at least five years, which is the minimum lock-in period. Moreover, the maturity proceeds are also eligible for tax benefits. However, if the annual premium exceeds 10% of the sum assured, the maturity proceeds are added to your income and taxed at your regular income tax rate.

3. Transparency and charges

ELSS funds levy only a single charge known as the ‘expense ratio’ or the fund management fee. This fee is adjusted against the Net Asset Value [NAV] of the fund and not separately charged. This allows you to determine the potential returns on your investment thereby providing complete transparency.

On the other hand, when you invest in ULIPs, a higher percentage of the total charges are levied during the initial investment period. The premium allocation charge, fund management fee, mortality charges, and policy administration charges are some of the fees associated with ULIP investments. After deducting all these charges, the balance amount is invested in different financial instruments. The charges are higher initially and reduce when you remain invested for the long-term, which may deliver lower returns on your investments. Moreover, you do not exactly know where your money is invested, which offers limited transparency. Additionally, some insurers may levy some of the charges by reducing the number of units and not the NAV, which also reduces the transparency.

This is an important difference between ULIP vs. ELSS and should be considered when you make the investment decision.

4. Switching option

A portion of your ULIP premium is invested in different financial instruments. ULIPs allow you to switch your investment from one fund to another in case of any such need. Therefore, you are able to mitigate the risk posed due to market volatility. Additionally, as you grow older, you may reduce your equity exposure by switching your investment to debt instruments. Insurance companies offer a limited number of free switches and you need to consider this while making any switches.

In comparison, such versatility is not available when you invest in ELSS plans. You cannot switch or exit your investment until the end of the minimum lock-in period. However, you may consider the dividend option to avail of regular returns on your investments.

5. Lock-in period

When you invest in a ULIP, you need to hold your investment for at least five years. During this period, you are unable to exit the investment or discontinue paying the premium. In case, you want to discontinue before the lock-in period, you will have to pay discontinuation charges with the balance money shifted to a discontinuation fund.

On the other hand, the minimum lock-in period for ELSS investments is three years. You cannot exit before the end of this period, which means there is no exit load for such investments.

Although you may exit both ULIP and ELSS at the end of their respective lock-in periods, it is recommended you hold your investments for a longer duration to maximize your returns. It is advisable you hold your ULIP investment for ten to 15 years while remaining invested in ELSS plans for seven to ten years is recommended.

ELSS and ULIPs are risky investments because the returns are dependent on the market performance. However, ULIPs are versatile because, in case of a market downturn, you have the flexibility of switching to debt products to prevent loss of your investment. This option is not available when you invest in ELSS plans. Moreover, ULIPs include life coverage, which is not included in ELSS. There are certain ULIP benefits and specific advantages of investing in ELSS plans. However, you need to take into consideration some factors while making your investment decision. Some of these include your risk taking capability, expected returns on investment, financial objective, and investment horizon.

It is recommended you research all the different options and evaluate your specific needs to make an accurate investment decision.